Alligator Trend Indicator (Alligator)
The next indicator is one of the basic ones and, like the previous ones, is quite simple and based on the principle of a change in trend. This indicator was developed by Bill Williams and is based on the principle of receiving signals of changing trends from 3 exponential moving averages (EMA). The indicator is mainly aimed at issuing signals about a trend change and signals for entering the market but is also able to indicate the strength and duration of the current trend. To work in the indicator, 3 EMAs with different averaging periods are used: Blue EMA – 21, red EMA – 13, green EMA – 8. A signal to change the trend and, as a result, market entry is the intersection point of all 3 MA.
A sell signal occurs when the green and red MAs cross the blue MA from top to bottom, while the green MA must also cross from top to bottom and the red MA. It is necessary to take profits at the moment of the red and green MA reverse intersection, and also, they both must cross the blue MA from the bottom up. The limiter of possible losses, in fact, is also a profit lock, since the reverse intersection of the red and green MA is a signal to exit the transaction.
A buy signal occurs when the green and red MAs cross the blue MA from the bottom up, and the green MA must also cross the red MA from the bottom up. It is necessary to take profits at the moment of the intersection of the red and green MAs, and also, they both must cross the blue MAs from top to bottom. The limiter of possible losses is also a profit lock since the reverse intersection of the red and green MA is a signal to exit the transaction.
The indicator shows the strength of the trend by the distance between all 3 MAs. If the distance between them is large, the trend is strong and enough time will remain in effect. If the MA lines are close to each other, the market is at the end of a trend or sideways.
At the end of the story about this indicator, I want to bring to your attention my author’s setting of this indicator, for issuing earlier signals to enter the transaction. If you look at the chart above, you will notice that the indicator gives an input signal with a great delay, and we miss almost a third of the trend.
Now, look at the same chart with the indicator, only with different indicator settings. Almost identical transactions, but now we receive a signal for their opening much earlier. This was made possible by setting another parameter – offset. As you can see in the settings window, in the offset graphs, I set negative values for the two signal EMAs. thus, they moved a certain number of periods to the left and began to give out a signal of intersection earlier. This made it possible to receive a single signal 2-3 periods earlier. On H4 timeframes and above, this is a very big advantage and can add an extra 2000 – 3000 points to our profit.
- Pretty simple indicator;
- Stable signals;
- The size of the profit sometimes far exceeds the invested capital;
- Ability to work at any time intervals;
- Signals to enter a trade are often late;
- The final result greatly depends on the number of transactions;
- The need for continuous monitoring;
- There is no way to work with pending applications.
Oscillator “Momentum” (Momentum)
This indicator refers to two types at once – it can also act as an oscillator, that is, give signals to enter the market, and as a trend indicator, indicate the presence and strength of the trend.
The principle of its operation is very simple. The basic settings are like an oscillator, and therefore it is not superimposed on the price chart but is located in a separate window below. His work is very similar to the basic operation of the MACD oscillator, which I described in detail in one of my articles. The basis for signals is the line of supply and demand balance (0). A standard EMA crosses this midline and provides market entry signals. When the indicator line is above 0, an uptrend is in effect, when below 0, a downtrend is in effect. Agree – all this is very, very simple, and sometimes it may seem that the momentum forex indicator seems to work, but it seems not. Because of its simplicity, it is very popular with beginners.
A sell signal occurs when the indicator line, which was above level 0, breaks through level 0 from top to bottom (red zone). It is necessary to take profits at the moment when the indicator line reaches 0 lines from the bottom (end of the red zone). The limiter of possible losses, in fact, is not provided, since the reverse crossing of level 0 from bottom to top will be a cancellation of a sell signal and a reason for exiting the transaction.
A buy signal occurs similarly to a sale, when the indicator line, which was below level 0, breaks through level 0 from the bottom up (green zone). It is necessary to take profits at the moment when the indicator line reaches level 0 from above (end of the green zone). The limiter of possible losses is also not provided, and the principle of exit from the transaction is similar to the sale.
- The simplest indicator;
- The ability to adjust the display of the indicator line;
- Very clear signals;
- Often gives signals on small timeframes;
- It works well in a flat.
- Large error in the testimony;
- Very much depends on the exact setting of the averaging period;
- Quality signals are only in a good trend;
- Market entry signals are often late.