Our aim is to make trading on the Binomo platform more user-friendly. This is why we want to present different tools, strategies, show you how to use them to your benefit and how to protect your balance account. Once you get to know the options, you can make your own choices about what responds to your preferences best. This article will explain how the Alligator indicator works. Let’s begin.
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The Alligator indicator
The Alligator was developed by Bill Williams. He is responsible, in fact, for inventing many other indicators such as the Awesome Oscillator, Williams Fractal, or the Accelerator/Decelerator Oscillator.
The name of the indicator we are going to describe today derives from the similarities to the living animal being fed. There are 3 moving averages that form the Alligator and one is called the Jaw, the other the Teeth and the third one the Alligator’s Lips.
Adding the Alligator to the chart
Log in to your Binomo trading account and choose the financial instrument. Set the timeframe of the chart and click on the indicators icon. The list of trading instruments will unfold and the Alligator will be on it. Click on its name and it will appear on your price chart.
The basics of the Alligator indicator
The Alligator follows the trend. Its inventor assumes that in the trending markets there are better chances for opening profitable transactions. According to some sources, the asset is trending only 15 to 30% of the time. The rest of the time, 70 to 85%, it is ranging.
You can use the Alligator indicator to recognise the moment when there is no trend and then when it begins to evolve. Furthermore, it can provide dynamic support and resistance.
Three moving averages in different colours create the Alligator. The Jaws is the slowest and the Lips the fastest. All three cross each other in different combinations and these crossings provide trading signals.
How to trade with the Alligator on the Binomo platform
There are many strategies based on this tremendous indicator. You can open short as well as long transactions with it. Let’s talk about the most common ways of using the Alligator in trading.
Identifying the trend with the Alligator
An animal has to sleep sometimes. In the market, the sleeping phase is when there is no trend. Our indicator reveals such a moment when the three lines are moving at a close distance. The Alligator is waking up when the moving averages are drifting away from each other. The animal is being fed, and the distance is widening. The further they are, the more powerful the trend.
We can assume the trend is getting weaker when the three lines of the Alligator are approaching each other again. A reversal of the trend is predicted, and you can search for opportunities to open a trading position. Wait for the pin bar to close at the indicator’s line, or for the crossover of the Lips and the Jaw.
Benefiting from the ranging market
When the beast is sleeping, it does not mean there are no opportunities to trade. All three lines are close to each other in this phase. But we can use the support and resistance levels. When the candles break one of them, we can expect a new trend to arise. These are the moments you can intend to open positions. Such a strategy is known as the range scalping method.
Dynamic support and resistance
The Alligator lines can be used as dynamic support and resistance. The condition is that there is an awakening phase, not the sleeping one. Wait for the candle to break the Jaw, the Lips, or the Teeth and enter the trade on the pullbacks.
The Lips and the Teeth crossovers
This strategy requires you to watch carefully two of the three lines of the Alligator, the Lips and the Teeth. When the Lips intersects the Teeth from the bottom, be ready to open a trade for the price increase. A short trade can be entered when the Lips crosses the Teeth from the top.
The breakout of the price bar
The situation when the price bar breaks out may happen faster than the Lips and the Jaw crossover. This gives an opportunity to enter the trade earlier. So watch when the candle closes above three Alligator lines and open a long trade, or when it closes below all the lines to open a down transaction.
Conclusion
The Alligator indicator invented by Bill Williams is a powerful tool used in trading. There are many strategies that can be applied while using it. You can identify the trend, its strength, as well as look for trading opportunities during the sleeping phase.
With time, you can experiment changing the parameters of the indicator. It will provide different results then.
The Alligator can be used with different chart patterns and other oscillators. Find the combination that works well for you.
Binomo demo account is offered to the platform users for free. You do not invest your own money there so this is a great place to train in a new method of trading. Head there now and add the Alligator to the chart. Try different strategies described in today’s article.
Enjoy trading!