Before we discuss the indicator, let us understand an important concept.
Thread: Alligator indicator
#Alligator #Indicators #Definedge
Before we discuss the indicator, let us understand an important concept.
Moving average at bar B is moving average price of bar A (5 candles behind). This is shifting of moving average price. What does it mean?
https://t.co/WkNxKU9n8u
Let us discuss the Alligator indicator.
Thread:- How Ichimoku indicator is calculated. pic.twitter.com/pM7AZvJjMj
— Prashant Shah (@Prashantshah267) April 15, 2020
Williams suggested Fib numbers 13, 8 and 5 period averages.
The averages are calculated on median price.
Median price = (High + low) / 2.
So, there are three lines plotted on the chart.
13-period MA is shifted by 8 bars
8-period MA is shifted by 5 bars
5-period MA is shifted by 3 bars
So, default parameters of Alligator indicator are 13,8,5 and 8,5,3.
The 13-period MA to 8 (13,8) is called as Alligator’s Jaws.
8-period MA to 5, the Teeth and
5-period MA to 3, the Lips.
When three lines are close to each other, the Alligator is sleeping.
If the Lips crosses the Teeth and Jaws upward or downward, the Alligator is waking up.
If Price crosses above or below the three lines, the Alligator is eating.
When three lines are close to each other, there is no clear trend.
When short-term average crosses other two upward or downward, the trend might emerge.
When three lines are trending, and price is above them, then it indicates strong uptrend.
Over a period, market trends roughly 20% – 30% times, it remains in a range rest of the time.
If Alligator sleeps more (long consolidation), it will become hungrier and eat more (Strong trend).
There are two important observations on this indicator which I found useful:
2 – Price low is above three averages and all averages are rising = Strong up trend. Price high is below averages and all averages are falling = strong downtrend.
These readings are also possible using other indicators and charts. Idea was to talk about the concept.
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