Alligator indicator is one of those indicators that after using, you just want to hug its inventor and thank them for making your online trading life so much easier.
You see, financial markets spend most of their time in a quiet state.
To put this statement into perspective, the financial market is only trending 15% to 30% of the time. The remaining 70% to 85% is spent on ranging.
This is where the Alligator indicator comes in.
It helps you point out these volatile periods in the market and reveal potential entry and exit points.
And that’s all you need as an IQ Option trader: an indicator to help you ride a trend by showing you when to buy and when to sell.
What is the Alligator?
In a nutshell, Alligator is a technical analysis indicator comprised of three moving average lines set at different periods.
The three MA lines are commonly known as the jaw, the teeth, and the lips of an Alligator.
What happens is that each of the three lines is set up such that they are shifted ahead for a specific period. This way, they align perfectly.
When using the alligator on IQ Option, this is how it appears: –
- The Alligator’s Jaw is an SMA13, shifted ahead by 8 bars. Commonly red.
- Alligator’s Teeth: – is an SMA8, shifted ahead by 5 bars. Commonly orange in color.
- The Alligator ‘Lips is an SMA5, moved ahead by 3 bars. Yellow in color.
These are the Alligator’s best settings.
I recommend you leave it as it is and only make changes if you understand what you are doing.
How to interpret the Alligator’s signals.
An indicator is useless if you cannot understand what it is telling you about the underlying instrument.
Decoding the Alligator indicator signals isn’t rocket science and I want to show you how to do that right away.
Like its nemesis, the Alligator is a trend-craving carnivore.
When the financial market experiences side swings, the Alligator’s mouth is closed.
Here, the three moving average lines are closer together and in some instances, even intersect.
During such periods, most traders avoid making any deals.
Now, as always, the longer the Alligator waits, the hungrier it gets.
The same can be witnessed here.
The longer the financial market spends in sideways trends, you should expect either a strong bullish or bearish trend. Luckily, the Alligator is going to catch all of them.
As the trend rally, so does the Alligator’s mouth: widens.
The three moving averages are moving away from each other. The Alligator’s mouth gets wider as the strength of the trend increases.
But once the beast’s thirst is quelled, it goes back to rest. That’s when you start seeing the lines assuming a horizontal manner and move together leaving a narrow corridor.
That’s how you interpret Alligator’s signals.
With this in mind, I know what you are thinking…
How to profitably trade Alligator’s signals in IQ Option.
There are only two profitable ways of applying the Alligator’s signals.
1. Defining the strength of an existing financial market trend.
Whenever the distance between the jaw, the teeth, and the lips of the Alligator increase, this is a sign that the trend is getting stronger.
Conversely, when the three moving average lines are moving closer together, it is a signal that the trend is dying out and you should, therefore, act accordingly, like enter a selling position.
2. Using the Alligator to predict a new trend.
To predict an upward trend – ensure that the lip is above the other two lines. Also, the teeth and the jawlines are intersecting
On the other hand, during a downtrend, the lips should be below the other two moving average and the intersection of the jaw and the teeth should be visible.
Up to that point, you are ready for the next step.
How to set up the Alligator indicator on IQ Option.
- Login to your IQ Option account and locate the Indicators tab on the bottom-left corner of your trading chart
- Click on the Popular feature and
- Then choose Alligator from the list of tools.
- Click on the Apply tab without changing any settings. The Alligator indicator will be added onto your IQ Option trading chart.
Wrapping up on the Alligator Indicator on IQ Option
The Alligator is a good tool for trading on IQ Option. That’s why a lot of pro traders on IQ Option trust and use it a lot.
But if you want to squeeze a lot of juice out of this tool, you have to follow some recommendations.
Let’s look at some of them:
- The Alligator works best when combined with other trading indicators. This way, you can maximize accuracy. MACD or Stochastic Oscillator could be a perfect combo.
- Since the Alligator works by combining three moving averages, it may experience lagging from time to time and provide late signals. As a result, keep in mind that the actual trend begins way earlier before the indicators pick it up.
- It wouldn’t hurt if you confirm the new trends in a higher period.
Finally, it’s your turn to practice these Alligator’s strategies on the IQ Option demo account.
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