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Alligator

"Most of the time the market remains stationary. Only for some 15–30% of time the market generates trends, and traders who are not located in the exchange itself derive most of their profits from the trends. My Grandfather used to repeat: "Even a blind chicken will find its corns, if it is always fed at the same time". We call the trade on the trend "a blind chicken market". It took us years, but we have produced an indicator, that lets us always keep our powder dry until we reach the blind chicken market"

Bill Williams

The Alligator technical indicator is a combination of Balance Lines (Moving Averages) that use fractal geometry and nonlinear dynamics.

The blue line (Alligator’s Jaw) is the Balance Line for the time frame that was used to plot the chart (13-period smoothed moving average moved to the future by 8 bars).

The red line (Alligator’s Teeth) is the Balance Line for the important time frame that is lower by one notch. It is a smoothed moving average graph that consists of 8 periods moved to the future by 5 bars.

The green line (Alligator’s Lips) is the Balance Line that stands for the important time frame that is lower by another level. It is a smoothed moving average graph that consists of 5 periods, moved to the future by 3 bars.

The Alligator’s jaw, teeth, and lips represent the interaction between different periods of time. It is possible to determine market trends only in 15-30% of cases. That is why you need to pay attention to the trends and not to trade on the markets with price dynamic taking place only within some price ranges.

One more moment should be mentioned.  The interlacing or closing of the jaw, teeth, and lips is called “alligator sleep”. The longer the sleep is, the hungrier the Alligator wakes up. When Alligator awakes, it opens jaws and starts to hunt for food. As soon as it has eaten enough, its food (price) with Balance Lines confirming that will signal the time for taking profit.

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