The Alligator indicator is the core of the system. This indicator determines the direction
in which we will trade. The Alligator is essentially made up of three key components, the
Jaw, the Teeth and the Lips.
The Alligator’s Jaw is represented by the Blue line. This line is a 13 period
Smoothed Moving Average which is shifted 8 bars into the future. The Alligator’s Teeth is represented by the Red line. This line is an 8 period
Smoothed Moving Average which is shifted 5 bars into the future.
The Alligator’s Lips is represented by the Green line. This line is a 5 period
Smoothed Moving Average which is shifted 3 bars into the future.
As you can see on the image below, when the Alligator Lips (Green line) and Teeth
(Red line) are above the Jaws (Blue line) the market is considered to be in an uptrend.On the image , you can see that when the Alligator Lips (Green line) and Teeth
(Red line) are below the Jaws (Blue line) the market is considered to be in a downtrend.
As you can see, the Alligator indicator helps us determine the trend direction and the
RSI serves to confirm the signal. On the image below you can see an example of how
upward trend. On the other hand, if the RSI is below the 50 level it serves as confirmation that the market is in a downward trend.
These are the rules for entering a Buy trade:
1. Wait for the Alligator Lip to cross above the Jaw.
2. Wait for the Alligator Teeth to cross above the Jaw.
3. Wait for the RSI 14 to cross above 50.
4. Enter a Buy trade at the open of the next candle.
5. Insert your Stop Loss below the most recent Swing Low.
6. Set your Take Profit the same number of pips away from your entry price as your
Stop Loss, i.e. a 1:1 or greater Risk/Reward Ratio
On the image above you can see an example of a Buy trade as per the rules of entry. As you can see, the Lips crossed above the Teeth. The Lips then crossed above the Jaw and the RSI was above the 50 level. At the open of the next candle I opened a Buy trade order and placed my Stop Loss below the most recent Swing Low around the 20 pips level. My Take Profit was set at the same number of pips as my Stop Loss. Within the space of about 5 candles price had moved in my favour and taken out my Take Profit level.
These are the rules for entering a Sell trade:
1. Wait for the Alligator Lip to cross below the Jaw.
2. Wait for the Alligator Teeth to cross below the Jaw.
3. Wait for the RSI 14 to cross below 50.
4. Enter a Sell trade at the open of the next candle.
5. Insert your Stop Loss above the most recent Swing High.
6. Set your Take Profit the same number of pips away from your entry price as your
Stop Loss, i.e. a 1:1 or greater Risk/Reward Ratio
On the image above you can see an example of a Sell trade as per the rules of entry.
As you can see, the Lips crossed below the Teeth. The Lips then crossed below the Jaw and the RSI was below the 50 level.
At the open of the next candle I opened a Sell trade order and placed my stop loss above the most recent Swing High around the 50 pips level. My Take Profit was set at the same number of pips as my Stop Loss. Within the space of about 3 candles price had moved in my favour and taken out my Take Profit level.
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The Alligator indicator (Jaws, Teeth, Lips) trading system |
On the image above you can see an example of a Buy trade as per the rules of entry. As you can see, the Lips crossed above the Teeth. The Lips then crossed above the Jaw and the RSI was above the 50 level. At the open of the next candle I opened a Buy trade order and placed my stop loss below the most recent Swing Low around the 90 pips level. My Take Profit was set at the same number of pips as my Stop Loss. Price moved in my favour immediately but it took a bit of time before price made its way up to my Take Profit level which was set just over 90 pips away from the entry level.
On the image above you can see an example of a Sell trade as per the rules of entry. As you can see, the Lips crossed below the Teeth. The Lips then crossed below the Jaw and the RSI was below the 50 level. At the open of the next candle I opened a Sell trade order and placed my stop loss
above the most recent Swing High around the 100 pips level. My Take Profit was set at the same number of pips as my Stop Loss. Price moved in my favour immediately but it took a bit of time before price made its way down to my Take Profit level which was set just over 100 pips away from the entry level.
The Alligator indicator (Jaws, Teeth, Lips) trading system
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Oleh
Piratebay
