Using the Alligator Indicator to Trade Trends and Avoid Ranges
Summary
The document explains the Alligator indicator as three smoothed, forward-shifted moving averages with different speeds: the jaw, teeth, and lips. It uses their arrangement and separation to describe three market conditions: tangled lines indicate consolidation, diverging lines suggest a developing trend, and the fast line turning back may signal weakening momentum.
Its proposed method is to avoid entries while the lines are entangled, trade in the direction of alignment when they spread apart, and consider closing when the fast line turns or crosses the middle line. The discussion is conceptual and gives no backtest, performance statistics, or precise indicator parameters. The indicator is lagging, so the document cautions that it is intended to follow established moves rather than identify market tops, bottoms, or reversals. Claims that it can eliminate whipsaws are overstated; sideways markets and false breakouts can still cause losses.
Key ideas
- The Alligator indicator uses three moving averages with different response speeds.
- Tangled lines are presented as a sign of consolidation where the method recommends staying out.
- A widening alignment of the lines is used to identify a possible directional trend.
- A turn or crossover of the fast line is treated as a potential signal to take profits.
- Because the indicator lags, it is unsuitable for pinpointing reversals and can still produce false signals.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.