Technical analysis is one of the fundamental skills that any forex trader should learn. Every trader in the foreign exchange market should be familiar with the different figures relating to currency values. Traders then should be able to correlate these figures in order to formulate a trading strategy and reap profits or minimize losses. There are various ways of interpreting and correlating these figures. Since the forex market opened decades back, financial experts have been developing their own tools for reading these figures in what is now termed as technical analysis. Tools that plot figures and show trends like the Gator Oscillator are now common place in most trading systems and platforms.
The Gator Oscillator was developed by Bill Williams as an adjunct tool to the Alligator Indicator. These indicators essentially plot moving averages to show trends which are likened to the way alligators awaken, eat, fill out, and sleep. Moving averages are the simplest of all types of indicators in that they make use of past currency pair prices in order to predict trends in future currency pair prices. These moving averages do not paint a picture of what is to happen next in a particular currency pair but rather gives an image of what patterns the past currency pair prices are forming. These patterns are then to be used by the trader in order to determine whether or not to open or close their position on that specific currency pair.
Most traders find it more visually appealing to make use of the Gator Oscillator as a way to look at the Alligator Indicator. This Oscillator presents the moving averages in colored bars that show the convergence or divergence of the moving averages. Three areas are highlighted in the Oscillator: the jaws, the teeth, and the lips. In the alligator indicator chart, the alligator is said to be up and ready to fill up when all three rows representing these three areas are in the correct order which is jaws at the bottom (blue line), teeth at the middle (red line), and lips on top (green line). In a Gator Oscillator, these values are represented in a histogram by colored bars. An alligator that fills up after eating is indicated by a red bar and a green bar. Both these charts are useful in triggering buy or sell orders from traders depending on what their trading strategy is.
The Gator Oscillator as well as the Alligator Indicator is designed to be used in tandem with other technical analysis tools to cross-reference and validate signals. Most modern trading platforms would have both of these tools installed along with other charting programs. It is important to keep in mind that the Gator Oscillator moves ahead of currency prices and could therefore mislead traders who are unfamiliar with this technical analysis tool. This all the more puts importance to validating price movements with other technical analysis and charting tools available. Just like any other technical analysis tool, these tools are not in any way guarantees that the prices of a particular currency pair will move in a specific direction or that any trade using the tool will be a profitable one.
