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

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 timeframe that was used to build the chart (13-period Smoothed Moving Average, moved into the future by 8 bars);
• Red Line (Alligator's Teeth) is the Balance Line for the significant timeframe of one level lower (8-period Smoothed Moving Average, moved by 5 bars into the future);
• Green Line (Alligator's Lips) is the Balance Line for the significant timeframe, one more level lower (5-period Smoothed Moving Average, moved by 3 bars into the future).

Lips, Teeth and Jaw of the Alligator show the interaction of different time periods. As clear trends can be seen only 15 to 30 per cent of the time, it is essential to follow them and refrain from working on markets that fluctuate only within certain price periods.

If the Jaw, Teeth and Lips are closed and kinked, the Alligator is going to sleep or is already sleeping. When it sleeps, its hunger grows; and the more it sleep, the more hungry it is when wakes up. When it wakes up, the first thing it does is it opens its mouth and begins to yawn. Then it starts smelling the food - meat of a bull or a bear, and then it starts hunting it. Having eaten enough to feel quite full, the Alligator starts to lose the interest to the food/price (Balance Lines join together) – this is the time to fix the profit.

Calculation:

MEDIAN PRICE = (HIGH + LOW) / 2

ALLIGATORS JAW = SMMA (MEDIAN PRICE, 13, 8)

ALLIGATORS TEETH = SMMA (MEDIAN PRICE, 8, 5)

ALLIGATORS LIPS = SMMA (MEDIAN PRICE, 5, 3)

Where:

MEDIAN PRICE – the median price;
HIGH – the high price of the bar;
LOW – the low price of the bar;
SMMA (A, B, C) – Smoothed Moving Average. A parameter is for data to be smoothed, B is the smoothing period, C is shift to future. For example, SMMA (MEDIAN PRICE, 5, 3) means that the smoothed moving average is taken from the median price, while the smoothing period is equal to 5 bars, and the shift is equal to 3 bars;
ALLIGATORS JAW – Alligator's jaws (blue line);
ALLIGATORS TEETH – Alligator's teeth (red line);
ALLIGATORS LIPS – Alligator's lips (green line).