Using the Gator Oscillator with the Alligator Indicator
The Gator Oscillator is one of the technical analysis tools that are used in most forex trading systems today. It is basically another visual representation of the Alligator Indicator which plots moving averages of prices to determine whether or not there is an uptrend – essentially a cue for forex traders to start opening or closing their positions depending on the currency pairs they are holding. The Gator Oscillator was devised by successful stock trader Bill Williams as an alternative to better visualize the price movements and trends on the alligator indicators. This technical analysis tool is highly dependent on price action and should be fed with accurate data in order to be reliable.
Forex trading systems that use the Gator Oscillator would also have the Alligator Indicator installed. These two are used in tandem with the Alligator Indicator plotted in a smoothened line that traces price movements in three moving averages: the 13-period simple moving average, the 8-period simple moving average, and the 5-period simple moving average. These moving averages are labelled as the alligator’s jaws, teeth, and lips respectively. They are also represented by a blue line for the jaws, a red line for the teeth, and a green line for the lips. The convergence or divergence of these lines as well as their crossing over are plotted and are used in order to spot potential trends that could possibly result in profitable trades. The farther apart these lines are, the better and stronger the trend is. On the other hand, when the lines start closing up and intertwining with each other, it is time to hold off on trades as the alligator starts preparing for a period of sleep.
The Gator Oscillator presents a colored histogram with the same raw data as the Alligator Indicator. This charting model does not make use of the jaws, the teeth, and the lips to illustrate moving averages. Instead, it uses colored bars to mark out the differences in the price values between the blue and the red lines or the jaws and the teeth and between the green and the red lines or the lips and the teeth. The Gator Oscilaltor uses the colors red and green to indicate how far apart the changes in price values are. The area above the zero mark represents the price difference between the Alligator Indicator’s jaws and the teeth, while the area below it represents that of its lips and the teeth.
With the same values used in the Alligator Indicator, the price differences are plotted accordingly in the Gator Oscillator. When the price difference at any given point is higher than that of the previous bar, it is marked with a green bar. In an opposite scenario, price difference is marked with a red bar. The combination of bars in the areas above and below the zero mark indicates the alligator’s activity and points to a trend. Any trader who familiarizes himself with the Gator Oscillator can make use of this technical analysis tool to take advantage of a vigorous trend for optimum profitability. The same data used in this both the Alligator Indicator and the Oscillator can be used in other technical analysis tools like the Elliott wave, similarly showing forex traders when to ride an impulsive wave.
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