Ways to Use Alligator Forex Indicator in the Forex Trading
The Alligator Strategy is typically comprised of three lines, spread across on the pricing chart. The Alligator strategy was developed to assist the traders to verify the occurrence of a drift and its direction. This indicator can assist the traders to assign impulse and to correctively form waves, yet this tool will work ideally only when complemented with the momentum indicator.
The Alligators “Traits” are vast and they can be associated to their sleeping and eating habits. As the trend occurs only at 20-30% of the period, this indicator assists the trader to his cash reserved till a suitable trend is persistent. The Alligator will help the trader to stay in his position, once a trend is formed.
Reading an Alligator Chart
The period setting “13, 8, 5” of Alligator indicator and the “8, 5, 3” shift settings is displayed in an arrangement with the candlesticks on the “30 min chart” for the currency pair of “EUR/USD”. The Alligator Jaw is shown as Blue lines, the teeth as Red lines and the lips in Green lines. The Red line seen on the chart signifies the “CCI” indicator which is denoted as a Red line to help in reading the generated signals.
The tangled lines here are the key reference points, when the green and red lines over the cross, they open. The Alligator is asleep, when they are entwined. So patience is required here. Alligator is said to be eating, when you see the lines apart. The trader can continue to trade provided the candlesticks ride is higher than the Alligator. It is period to exit, when the lines cross or converge, even though a better outlet point is possible through a momentum indicator.
Like with the other indicators, this Alligator chart will not show cent percent correctness. Chances of false signals are probable, but the Forex trader gets an edge, as the positive signals are stable. A technique in decoding and understanding Alligator Sign alerts must be developed eventually, and matching the Alligator device with another sign is always suggested for further verification of potential changes in trend.