What is Alligator?
Alligator is the best indicator for trend detection. It consists of three moving averages called jaw, teeth and lips. Moving averages are frequently used in algorithmic trading bots. They can be exponential, smooth or weighted depending on specific crypto trading algorithm, but we will use smooth moving averages (SMA).
Jaw (blue line) – 13 period SMA moved 8 bars is the future. This is the balance lie of the current time frame, for example 1D Teeth (red line) – 8 period SMA moves 5 bars into the future. This is balance line of lower degree time frame, for example 4h Lips (green line) – 5 period SMA moves 3 bars in the future. It is a balance line of twice lower degree time frame, for example 1h Please be careful when using Alligator on different cryptocurrency trading platforms. Check the correct settings and moving average type. On TradingView it is correct, don’t worry!
Trend tracking with Alligator. The main feature of the Alligator is the detection of the trending markets and markets that are about to explode on either side. This powerful tool can improve your crypto trading algorithm if you use it the right way. On the ATOM price chart you can see the example of an Alligator. As you can see it has two states: sleep and hunger.
Sleeping Alligator is when all lines cross each other and the price. This period can take up to 80% of the time. This is the market cycle stage where you will avoid any trade and must be prepared for the trending market Hungry Alligator is when after a long period of consolidation price has chosen the trend direction. It’s an impulsive move. Alligator’s mouth is wide open and does not cross the prize.
It is very important to distinguish the trend market because only this type of market gives you opportunity for quick and big profit. Otherwise, in the range bound market you don’t have enough space for price to make you a profit. Most stop losses occur while Alligator is sleeping. One more very useful tip for you. If you use Elliott waves analysis. You don’t need to understand what wave market is in right now. You just jump into the impulses and avoid corrections.
How to Trade Alligator
Here is the most interesting part. How to start crypto trading with Alligator? Our basic strategy is to wait when the price will create the first fractal above the Alligator’s mouth and place conditional order to buy one tick above the fractal’s top. We will discuss fractals in detail next time. Now you need to understand how to use Alligator.
Another tip from our experience is to use fractals only when Alligator has been sleeping for a long time, as you see on the BTC chart. After long sleep and fractal breakout, Bitcoin showed the biggest bull run in history.
Let’s note where to close our trade. Almost at the top! When price began to show weakness, we no longer needed to be in the market. By using this strategy on 1W time frame, you can hold assets during the entire bull run and then sell before the bear market. Fantastic! isn’t it?
Closure
In this article we discussed how you can implement Alligator indicator in your trading routine. This indicator will help you avoid boring market when you can only lose money and catch every big move. Moreover, you can even use sideways market tracking if you use cryptocurrency trading bot that makes money in a range-bounded market. This is certainly not the only strategy used by Alligator. Next time we improve our approach with other instruments and see in detail how Alligator improves their profitability. In addition, we will soon live stream where practice trades with Alligator. See you next time!
Best Regards, Skyrex Team
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While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
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