Usage of the Alligator/Gator Indicator
The Alligator indicator is a combination of three Smoothed Moving Averages. It helps to evaluate the dynamics of the price, it shows the interaction of the price behavior in different time intervals.
The green line — the alligator lips — is a five-period Smoothed Moving Average, dislodged three bars forward.
The red line — the alligator teeth — is an eight-period Smoothed Moving Average, dislodged five bars forward.
The blue line — the alligator jaws — is a thirteen-period Smoothed Moving Average, dislodged eight bars forward.
When the lines come together, the alligator falls «asleep». This is the time of peace in the market, when no significant changes occur. When the lines branch off, the alligator «wakes up», and starts «hunting», either on the Up-Trend, or on the Down-Trend.
In a strategy, it is reasonable to place two entry Stop orders, one for buy, and another one for sell, when the alligator «wakes up».
The Gator is an indicator that shows the convergence/divergence of the Alligator lines. The top bar graph is the absolute value of the difference between the blue and the red line. The bottom bar graph is an absolute value of the difference between the green and the red line, reflected into the negative values range.