In theory, oscillators like the alligator oscillator, are a group of mathematical indicators that have the innate capacity to isolate a great range of price action and refine them into data that can be of practical significance for the trader. There was a phase in the history of trading wherein the traders had a very difficult time in doing the identification of the low or high value during the course of participation in the market. Even if there exists a very clear individual mental concept on as to what a low or high in an ordinary trader’s day is, the chaotic, sensitive, and volatile nature of the trading environment prevents anyone from arriving at definite conclusions.
Therefore, it can be said that the creation of oscillators is a direct result of the traders’ realization that high and low prices, let alone, cannot sufficiently serve as their guide when it comes to the trading process. These are not capable of determining what makes up a market’s extreme value. The oscillators have the primary aim of giving a solution to this problem. Oscillators have the capability to identify the essential indicator level that defines the bottoms and tops, thus helping an ordinary trader to come up with a well-calculated decision.
You might be asking, “What can be the practical use of such indicators like the alligator oscillator?” For one, any indicator has the capacity to determine or point out the turning points, the bottoms and the tops, and this is something practical especially for those who are concerned only with the ranges of trading only. The oscillators are also quite useful in the process of pointing out trending markets.
With the sufficient introduction, you are now ready to take a closer look to an oscillator that was developed by Bill Williams. The alligator oscillator is considered to be a close relative of the gator oscillator, another indicator developed by Williams. According to experts, the alligator is a very close resemblance of the gator oscillator. The big part of the difference lies on the manner in which the two oscillators present their respective data. Gator oscillator makes us of signals on a histogram that is located right below the price chart. On the other hand, the alligator makes use of a chart that presents the indicators in the rawest possible form that enables traders to make an in-depth analysis.
The alligator oscillator resembles a moving average chart simply because it is just a conglomeration of moving averages. The market action’s profitable stage can be determined by the alligator and it only exists when there are two indicators contracting. There are three components, namely: the lips, the teeth, and the jaw. When all three components converge and the alligator’s mouth closes, opportunity presents itself every time the position opens or closes. The reliability of the alligator is considered to be high as well. It is thought to be accurate 30 to 50 percent of the time. On top of all this, traders love the fact that the alligator oscillator is simple and easy to understand.