Free forex signals and indicators

Average True Range: the ATR indicator

The ATR is an attempt at finding out about trader sentiment by comparing price ranges over a period of time. To do this in an easily understood and observed manner, the range values are presented in the form of an exponential moving average.

Note: Past performance is not indicative of future results.

As we see, the ATR looks more like an oscillator than a moving average. This because of the fact that although prices do not have bounds (they can move as high or low as the market can take them), the actual trading range is in fact confined to practical limits during even the most heated action in the market. By making use of this knowledge J. Welles Wilder was able to create an exceptionally simple, yet powerful and tradeable indicator.

Calculation of the ATR

The average true range indicator is in some ways similar to the commodity channel index discussed in this site. Here also, we compare price ranges with previous values to establish overbought oversold levels. But unlike the CCI, the ATR itself is a moving average: namely, it is the exponential average of a concept called the "true range" over a trader-determined period. Let's examine how it is calculated in greater detail.

Let's first define a few concepts used in the determination of the true range:

The range is the value (H - L) where H is the high, while l is the low of the price over the period.

The true range is the extension of this concept to the period prior to the one in consideration. It is defined as Max(high, close) - Min (low, open) of the previous period, if the price action extended beyond today's range in that timeframe. In plainer terms, the true range is the largest distance between the high or close, and low or open of a time period. It is an attempt to discover the greatest extent that the price action covered, thus establishing how agitated traders were.

The Average True Range indicator is then computed by taking the exponential moving average of the true ranges of a predefined period. The exponential moving average is sensitive to the latest movements in the price, and it is thus used as a gauge of trader enthusiasm in the market.

Trading with ATR

There are two ways of using the ATR. One is looking for divergence/convergence patterns between the price action and the indicator values. If the range is contracting even as the market is breaking new records, we would consider the possibility that traders are losing confidence in the momentum of the market. Otherwise, successive highs would result in greater ranges as more and more traders are excited about the price action. Another way of utilizing this indicator is looking for trends in the daily ranges, and entering or exiting positions in anticipation of breakouts. If the EMA is showing pattern of increasing ranges while the price action itself is muted, there is signal that a consolidation formation will culminate in a breakout one way or the other.

As with the CCI, and the Williams Oscillators, the ATR is a volatile indicator. If you plan to use it in your trade decisions, it is a good idea to complement your trading strategy with strong risk controls so that the whipsaws that materialize, like those observed in the chart, do not lead to unacceptably high losses.

Finally, it is very important to understand that the ATR does not say much about price direction, or trend duration. It measures the volatility of the price action, and is useful for analyzing extremes of positioning, both in trends, and range patterns. For analyzing direction and duration, we should use other indicators derived for this purpose.

Accessibility

ATR is not one of the most popular indicators out there, but it is regarded as a part of the standard toolbox of any trader, beginner, or professional. It comes as a part of the Easy-Forex trading software, the MetaTrader platform, as well the trading packages of MGForex, or ForexClub. Some minimalist designs may not include it, so it is a good idea to check before you make a decision about your account.

Conclusion

The ATR indicator is a powerful tool for volatility based strategies. Although prone to generating whipsaws, its role as a volatility indicator means that you can determine the type of market that you wish to trade with the ATR, while deriving actual signals and entering trades on the basis of other secondary strategies. Most of us have a good idea on how important volatility is in determining the profit potential, and suitability of a particular market environment for our trading decisions. The ATR, along with the Bollinger Bands, is an exceptional way of measuring this aspect of the market, and offers great potential to those who seek to use it.

For more info linck here

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Trading with the Demarker Indicator

DeMarker Indicator is an oscillator, and it is possible to use with it all the common techniques that are applied to oscillators. The oversold and oversold levels of the indicator are at 0.3, and 0.7, respectively. When the oversold value is exceeded, the expectation is that the prices may soon stop falling. In the opposite case, we anticipate that the uptrend will run out of steam in a short time.

If you remember how the RSI is constructed, you will note that the formulation of the demarker indicator is almost the same as that of the RSI with the difference being that the RSI most often uses an exponential moving average, while the demarker indicator uses the simple moving average of the prices. But on the whole, both indicators compute the same formulae for the min-max values, and interpret them in very similar ways.

In short, it is fair to say that one will never need to create technical strategy where both the Demarker and RSI indicators are necessary. They are both oscillators, but beyond that, the great similarity between the two indicators means that using one will always grant us all the information that can be derived from the other.

The indicator is most suitable to a ranging market. If it is used in trending markets, it must be used as an auxiliary to a trend indicator, and divergence/convergence configurations must be sought out for its interpretation.

Conclusion

The Demarker indicator is a solid, simple and reliable oscillator in general, and can be used as a substitute for the RSI when the trader chooses to do so. It doesn't possess any great qualities distinguishing it from the latter, however, so there is no point in creating a combination of the two in just about any conceivable scenario. Arguably, the decision to use any of these two indicators will depend on availability. It is a good idea to use one when it is available and not to worry too much about the other

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Bollinger Bands: The Best Volatility Gauge for the Intraday Trader

Introduction

One of the more common technical tools used by traders, the Bollinger Bands were created by John Bollinger in the early 80s. The tool was not intended as a technical analysis item for trading decisions, but its perceived utility for that purpose has made it widely popular in the ensuing decades. It is likely to be a part of any useful trading software, and is utilized both independently, and also as part of a general trading strategy by countless traders all over the world.

Note: Past performance is not indicative of future results.

Here we see a typical day's price action analyzed with the Bollinger Bands. We observe the contraction of the bands in the middle part of the chart, and on the left- hand side. In between, we observe the bands expanding as the violent up- and downward movements create great momentum in the market. The upper and lower lines are the standard deviations to be discussed below soon, while the middle line is the moving average often used as the signal line by traders.

Calculation of the Bands

The Bollinger Band consists of a moving average, and two standard deviation indicators superimposed on it. The standard deviation is used to determine how much the price diverges from the mean (i.e. how great the momentum is) for the ongoing market movement. Interested readers can refer to the related article on this website, but typically, the standard deviation will move away from the moving average in the middle when the price moves up or down with strong momentum.

More concisely, the Bands consist of

an N-period SMA, EMA, or smoothed moving average in the middle, depending on the choice

the upper Bollinger Band, which is an N-period standard deviation multiplied with a factor K, and added to the SMA value

the lower Bolliner Band, which is the same, but the standard deviation is subtracted from the SMA.

N and K can be determined by the trader. Typical values are 20 for N (the SMA and standard deviation period), and 2 for K. The K factor is used to make bands pronounced and easily observed.

Trading with the Bollinger Bands

There are many different ways of interpreting the bands. At its simplest form, (and also as advocated by its creator, Professor Bollinger) the bands are used to measure volatility. They expand when volatility is rising, and contract when it is falling. The bands are a good gauge of volatility with very easily identifiable visual patterns emerging as the market progresses through various phases. In addition, over the years traders have also improvised many different ways of using this indicator for trading decisions. One way is to buy or sell when the price action crosses the upper or lower band, respectively, anticipating a breakout, or a rapid movement of the price. Trades are closed when the price returns to the moving average in the middle. Another way to use this indicator is anticipating a reversal after long periods of low or high volatility. For example, a trader will enter a buy order in an uptrend after the bands remain close together for a long while, anticipating the next leg of the trend to commence soon. There are also many composite strategies using the Bands for anything from confirmation to signal generation for an incipient price phenomenon.

Accessability

Just about any trading platform will come equipped with the Bollinger Bands since it is so popular among traders. The MetaTrader 4 platform, DealBook of GFT Forex, FXCM Trade Station all provide this indicator, as well countless others not mentioned in this article.

Conclusion

Bollinger Bands serve two purposes. They depict market volatility in an easily identifiable form, and they also help us in trading decisions. The creator of the indicator does not claim that the Bands predict anything about future price action, but that doesn't prevent the indicator being very popular in that role. It is, of course, up to you to decide in which way you'll be using the Bands

Note: Past performance is not indicative of future results.

The lower section of the chart demonstrates the Demarker indicator in action. As the price fails to break through 1.4575 level, the indicator fluctuates against the neutral 0.5 level, confirming the indecision of traders. Later, however, the indicator crosses below the 0.5 level decisively, as observed on the chart, confirming the downtrend, and reaching a level very close to zero before finally reversing and approaching the signal line at 0.3. In spite of the developing divergence, price action remains conclusive however, as MA line remains safe, and no actionable, clear signal can be derived at this stage. We give this example to remind the reader once more that it is safe and prudent to avoid taking any position when clear signals backing it are lacking.

Calculation of the Indicator

The Demarker indicator is calculated by first determining a DeMin, and DeMax value, which roughly correspond to the high or low of a particular time period. The obtained values are then plugged into a formula which generates the value of the indicator itself.

If the high of today is greater than the high of yesterday, we set the DeMin value at the difference of highs of the two time periods (High of today - high of yesterday). Otherwise, DeMax is set to zero. Similarly, if the low of today is lower than the low of yesterday, the difference between the lows of the two periods becomes the value of DeMin (low of today- low of yesterday). If the low of yesterday is equal or lower than today's low, DeMin is set to zero.

Now we plug these two values into the formula below:

DeMark = N-period Moving Average of  DeMax / (N-period Moving Average of  DeMax + N-period Moving Average of DeMin)

Here the moving average can be of any type, but most software packages use the simple moving average for calculation.

Taking a look at this formula, we observe that the value of the indicator will rise when the higher DeMax values are registered (in other words, market records higher highs on), and it will fall when the moving average of the lows attains higher values.

For more info linck here

Free forex signals and indicators

Average True Range: the ATR indicator

The ATR is an attempt at finding out about trader sentiment by comparing price ranges over a period of time. To do this in an easily understood and observed manner, the range values are presented in the form of an exponential moving average.

Note: Past performance is not indicative of future results.

As we see, the ATR looks more like an oscillator than a moving average. This because of the fact that although prices do not have bounds (they can move as high or low as the market can take them), the actual trading range is in fact confined to practical limits during even the most heated action in the market. By making use of this knowledge J. Welles Wilder was able to create an exceptionally simple, yet powerful and tradeable indicator.

Calculation of the ATR

The average true range indicator is in some ways similar to the commodity channel index discussed in this site. Here also, we compare price ranges with previous values to establish overbought oversold levels. But unlike the CCI, the ATR itself is a moving average: namely, it is the exponential average of a concept called the "true range" over a trader-determined period. Let's examine how it is calculated in greater detail.

Let's first define a few concepts used in the determination of the true range:

The range is the value (H - L) where H is the high, while l is the low of the price over the period.

The true range is the extension of this concept to the period prior to the one in consideration. It is defined as Max(high, close) - Min (low, open) of the previous period, if the price action extended beyond today's range in that timeframe. In plainer terms, the true range is the largest distance between the high or close, and low or open of a time period. It is an attempt to discover the greatest extent that the price action covered, thus establishing how agitated traders were.

The Average True Range indicator is then computed by taking the exponential moving average of the true ranges of a predefined period. The exponential moving average is sensitive to the latest movements in the price, and it is thus used as a gauge of trader enthusiasm in the market.

Trading with ATR

There are two ways of using the ATR. One is looking for divergence/convergence patterns between the price action and the indicator values. If the range is contracting even as the market is breaking new records, we would consider the possibility that traders are losing confidence in the momentum of the market. Otherwise, successive highs would result in greater ranges as more and more traders are excited about the price action. Another way of utilizing this indicator is looking for trends in the daily ranges, and entering or exiting positions in anticipation of breakouts. If the EMA is showing pattern of increasing ranges while the price action itself is muted, there is signal that a consolidation formation will culminate in a breakout one way or the other.

As with the CCI, and the Williams Oscillators, the ATR is a volatile indicator. If you plan to use it in your trade decisions, it is a good idea to complement your trading strategy with strong risk controls so that the whipsaws that materialize, like those observed in the chart, do not lead to unacceptably high losses.

Finally, it is very important to understand that the ATR does not say much about price direction, or trend duration. It measures the volatility of the price action, and is useful for analyzing extremes of positioning, both in trends, and range patterns. For analyzing direction and duration, we should use other indicators derived for this purpose.

Accessibility

ATR is not one of the most popular indicators out there, but it is regarded as a part of the standard toolbox of any trader, beginner, or professional. It comes as a part of the Easy-Forex trading software, the MetaTrader platform, as well the trading packages of MGForex, or ForexClub. Some minimalist designs may not include it, so it is a good idea to check before you make a decision about your account.

Conclusion

The ATR indicator is a powerful tool for volatility based strategies. Although prone to generating whipsaws, its role as a volatility indicator means that you can determine the type of market that you wish to trade with the ATR, while deriving actual signals and entering trades on the basis of other secondary strategies. Most of us have a good idea on how important volatility is in determining the profit potential, and suitability of a particular market environment for our trading decisions. The ATR, along with the Bollinger Bands, is an exceptional way of measuring this aspect of the market, and offers great potential to those who seek to use it.

For more info linck here

Free forex signals and indicators

Demarker Indicators

The Demarker indicator is named after Tom Demarker who claims to have developed this indicator to overcome the shortcomings of other overbought/oversold oscillators. There are different versions of it  in the market; in some cases the indicator uses 0 and 1 as the maximum and minimum of oscillation, while in others the typical 0-100 range is preferred.

Any level between 3 and 7 (or 30 and 70 if bigger numbers are preferred) is regarded as a neutral level characterizing a continuation phase. If the price is in an uptrend, and the indicator value is also rising, the trend is expected to go on. If we observe an uptrend, while the indicator value is falling, we're faced with a divergence, implying that the uptrend is slowly losing momentum and may suffer an abrupt reversal. Similarly, when the price is in a downtrend, but the indicator's value is rising, we suspect that the downtrends is weak. The oscillator and price action are converging, implying an ultimate reversal. If both the indicator and the price are in an uptrend, the interpretation is that the existing price pattern will continue to develop.

Bollinger Bands: The Best Volatility Gauge for the Intraday Trader

Introduction

One of the more common technical tools used by traders, the Bollinger Bands were created by John Bollinger in the early 80s. The tool was not intended as a technical analysis item for trading decisions, but its perceived utility for that purpose has made it widely popular in the ensuing decades. It is likely to be a part of any useful trading software, and is utilized both independently, and also as part of a general trading strategy by countless traders all over the world.

Note: Past performance is not indicative of future results.

Here we see a typical day's price action analyzed with the Bollinger Bands. We observe the contraction of the bands in the middle part of the chart, and on the left- hand side. In between, we observe the bands expanding as the violent up- and downward movements create great momentum in the market. The upper and lower lines are the standard deviations to be discussed below soon, while the middle line is the moving average often used as the signal line by traders.

Calculation of the Bands

The Bollinger Band consists of a moving average, and two standard deviation indicators superimposed on it. The standard deviation is used to determine how much the price diverges from the mean (i.e. how great the momentum is) for the ongoing market movement. Interested readers can refer to the related article on this website, but typically, the standard deviation will move away from the moving average in the middle when the price moves up or down with strong momentum.

More concisely, the Bands consist of

an N-period SMA, EMA, or smoothed moving average in the middle, depending on the choice

the upper Bollinger Band, which is an N-period standard deviation multiplied with a factor K, and added to the SMA value

the lower Bolliner Band, which is the same, but the standard deviation is subtracted from the SMA.

N and K can be determined by the trader. Typical values are 20 for N (the SMA and standard deviation period), and 2 for K. The K factor is used to make bands pronounced and easily observed.

Trading with the Bollinger Bands

There are many different ways of interpreting the bands. At its simplest form, (and also as advocated by its creator, Professor Bollinger) the bands are used to measure volatility. They expand when volatility is rising, and contract when it is falling. The bands are a good gauge of volatility with very easily identifiable visual patterns emerging as the market progresses through various phases. In addition, over the years traders have also improvised many different ways of using this indicator for trading decisions. One way is to buy or sell when the price action crosses the upper or lower band, respectively, anticipating a breakout, or a rapid movement of the price. Trades are closed when the price returns to the moving average in the middle. Another way to use this indicator is anticipating a reversal after long periods of low or high volatility. For example, a trader will enter a buy order in an uptrend after the bands remain close together for a long while, anticipating the next leg of the trend to commence soon. There are also many composite strategies using the Bands for anything from confirmation to signal generation for an incipient price phenomenon.

Accessability

Just about any trading platform will come equipped with the Bollinger Bands since it is so popular among traders. The MetaTrader 4 platform, DealBook of GFT Forex, FXCM Trade Station all provide this indicator, as well countless others not mentioned in this article.

Conclusion

Bollinger Bands serve two purposes. They depict market volatility in an easily identifiable form, and they also help us in trading decisions. The creator of the indicator does not claim that the Bands predict anything about future price action, but that doesn't prevent the indicator being very popular in that role. It is, of course, up to you to decide in which way you'll be using the Bands

Note: Past performance is not indicative of future results.

The lower section of the chart demonstrates the Demarker indicator in action. As the price fails to break through 1.4575 level, the indicator fluctuates against the neutral 0.5 level, confirming the indecision of traders. Later, however, the indicator crosses below the 0.5 level decisively, as observed on the chart, confirming the downtrend, and reaching a level very close to zero before finally reversing and approaching the signal line at 0.3. In spite of the developing divergence, price action remains conclusive however, as MA line remains safe, and no actionable, clear signal can be derived at this stage. We give this example to remind the reader once more that it is safe and prudent to avoid taking any position when clear signals backing it are lacking.

Calculation of the Indicator

The Demarker indicator is calculated by first determining a DeMin, and DeMax value, which roughly correspond to the high or low of a particular time period. The obtained values are then plugged into a formula which generates the value of the indicator itself.

If the high of today is greater than the high of yesterday, we set the DeMin value at the difference of highs of the two time periods (High of today - high of yesterday). Otherwise, DeMax is set to zero. Similarly, if the low of today is lower than the low of yesterday, the difference between the lows of the two periods becomes the value of DeMin (low of today- low of yesterday). If the low of yesterday is equal or lower than today's low, DeMin is set to zero.

Now we plug these two values into the formula below:

DeMark = N-period Moving Average of  DeMax / (N-period Moving Average of  DeMax + N-period Moving Average of DeMin)

Here the moving average can be of any type, but most software packages use the simple moving average for calculation.

Taking a look at this formula, we observe that the value of the indicator will rise when the higher DeMax values are registered (in other words, market records higher highs on), and it will fall when the moving average of the lows attains higher values.

For more info linck here

Free forex signals and indicators

                                            Alligator Oscillator

Introduction

The Alligator oscillator is very similar to the Gator oscillator which we have examined previously in these pages. The difference between the two indicators lies almost entirely in the presentation of data. While the Gator oscillator presents any valid signals in a histogram below the price chart, the Alligator chart provides the oscillators in a raw form so as to enable wider and deeper analysis.

The Alligator oscillator, like the Gator oscillator, was developed by Bill Williams.

 

Note: Past performance is not indicative of future results.

The chart looks very similar to a moving average chart, and that is what it is. The profitable phase of the market action is thought to exist between two contractions of the indicators. Every time the three components (jaw, teeth, lips) come together, and the mouth closes, an opportunity to open or close a position is presented. Trader lore states that the indicator emits correct signals about 30-50% of the time.

Calculation

The Alligator indicator is really a very simple tool once you understand what it is. Three smoothed moving averages plotted on a price chart and shifted by a few bars into the future create this indicator, and the slower and the less sensitive the moving average is to market action, the further into the future it is shifted.

Jaw, or the blue line, is the 13-period smoothed moving average shifted 8 bars into the future. It is also the slowest indicator.

Teeth, or the red line, is the 8-period smoothed moving average shifted 5 bars into the future.

Lips, or the black line (although it is commonly depicted in green by charting software), is the fastest 5-period smoothed moving average, moved 3 bars into the future.

As it us the case with the Gator oscillator, the interaction between these three SMMA's determines the trade signal.

Usage

This indicator is constructed on the notion that each trend, and its phases (or mini-trends), consist of waves that coincide with start, development, culmination and exhaustion, akin to the logic behind the Elliot Wave Theory. Similar to the Gator indicator, the four phases of the alligator's life must be identified.

Alligator Waking: When the green, or black line falls above or below the blue line, (or when the teeth rise above or below the jaw) after a period of contraction, the alligator is said to be waking up. This is the typical indication of a beginning phase for a trend.

Alligator Eating: At this phase the mini-trend is well-established, and we see the teeth breaching through the lips, and 'eating' signifying that the trend is soon to reach its climax.

Alligator Sated: We now see the teeth coming back or below the blue line, and the three lines beginning to contract to a smaller area, as the price action decelerates, and the trend has run its course.

Alligator sleeping: At this phase the smoothed moving averages come together, or in more colorful language, the mouth closes as the jaw, lips and teeth adhere to each other once again. This phase signals that the current trend has exhausted itself at least in its present configuration, and it is time to sit back and reevaluate the situation.

Conclusion

Let's recall what the alligator oscillator oscillator is. It is three smoothed moving averages drawn together on a chart and shifted to the left a little with the purpose of identifying profitable scenarios. As such, very little distinguishes it from a standard moving average strategy, and the differences that exist do not exceptionally favor this indicator.

The Alligator oscillator is most suitable to a trending market. It can be used in shorter timeframes in the context of an overarching range pattern, but it will surely generate many false signals in a ranging market. The best indicators to supplement it are support/resistance lines, or Fibonacci indicators to determine price targets if you happen to be beginner. Just keep in mind that trends are violent will easily invalidate any imaginary line on the charts, however strong it may appear.

If you wish to use moving averages in your trend analysis, make use of the alligator instead. Otherwise, the ichimoku cloud, also covered on this site, may be a better choice for greater clarity and depth of analysis.

For more info linck here

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                                      Alligator Oscillator

Introduction

The Alligator oscillator is very similar to the Gator oscillator which we have examined previously in these pages. The difference between the two indicators lies almost entirely in the presentation of data. While the Gator oscillator presents any valid signals in a histogram below the price chart, the Alligator chart provides the oscillators in a raw form so as to enable wider and deeper analysis.

The Alligator oscillator, like the Gator oscillator, was developed by Bill Williams.

 

Note: Past performance is not indicative of future results.

The chart looks very similar to a moving average chart, and that is what it is. The profitable phase of the market action is thought to exist between two contractions of the indicators. Every time the three components (jaw, teeth, lips) come together, and the mouth closes, an opportunity to open or close a position is presented. Trader lore states that the indicator emits correct signals about 30-50% of the time.

Calculation

The Alligator indicator is really a very simple tool once you understand what it is. Three smoothed moving averages plotted on a price chart and shifted by a few bars into the future create this indicator, and the slower and the less sensitive the moving average is to market action, the further into the future it is shifted.

Jaw, or the blue line, is the 13-period smoothed moving average shifted 8 bars into the future. It is also the slowest indicator.

Teeth, or the red line, is the 8-period smoothed moving average shifted 5 bars into the future.

Lips, or the black line (although it is commonly depicted in green by charting software), is the fastest 5-period smoothed moving average, moved 3 bars into the future.

As it us the case with the Gator oscillator, the interaction between these three SMMA's determines the trade signal.

Usage

This indicator is constructed on the notion that each trend, and its phases (or mini-trends), consist of waves that coincide with start, development, culmination and exhaustion, akin to the logic behind the Elliot Wave Theory. Similar to the Gator indicator, the four phases of the alligator's life must be identified.

Alligator Waking: When the green, or black line falls above or below the blue line, (or when the teeth rise above or below the jaw) after a period of contraction, the alligator is said to be waking up. This is the typical indication of a beginning phase for a trend.

Alligator Eating: At this phase the mini-trend is well-established, and we see the teeth breaching through the lips, and 'eating' signifying that the trend is soon to reach its climax.

Alligator Sated: We now see the teeth coming back or below the blue line, and the three lines beginning to contract to a smaller area, as the price action decelerates, and the trend has run its course.

Alligator sleeping: At this phase the smoothed moving averages come together, or in more colorful language, the mouth closes as the jaw, lips and teeth adhere to each other once again. This phase signals that the current trend has exhausted itself at least in its present configuration, and it is time to sit back and reevaluate the situation.

Conclusion

Let's recall what the alligator oscillator oscillator is. It is three smoothed moving averages drawn together on a chart and shifted to the left a little with the purpose of identifying profitable scenarios. As such, very little distinguishes it from a standard moving average strategy, and the differences that exist do not exceptionally favor this indicator.

The Alligator oscillator is most suitable to a trending market. It can be used in shorter timeframes in the context of an overarching range pattern, but it will surely generate many false signals in a ranging market. The best indicators to supplement it are support/resistance lines, or Fibonacci indicators to determine price targets if you happen to be beginner. Just keep in mind that trends are violent will easily invalidate any imaginary line on the charts, however strong it may appear.

If you wish to use moving averages in your trend analysis, make use of the alligator instead. Otherwise, the ichimoku cloud, also covered on this site, may be a better choice for greater clarity and depth of analysis.

For more info linck hrer

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Gator Oscillator

What is the Gator Oscillator?

The Gator oscillator is a forex trading tool developed by Bill Williams. It is closely related to the similar Alligator oscillator. As a trend indicator itd is most useful in markets that display strong directional action. 

Note: Past performance is not indicative of future results.

On this chart, the upper section shows the price action, while the lower part is the Gator indicator. The smoothed moving averages that create the value of the bars are not depicted on the graph. As you can see, each bar of the indicator is comprised of a lower and an upper section the interaction of which determines the way the indicator is interpreted.

Calculation

The indicator is calculated according to the following formulae.

Median Price = (High + Low)/2

Jaw (lower moving average) = Smoothed moving average of the median price over 13-period

Teeth (upper moving average) = Smoothed moving average of median over 8-period

Lips (middle moving average) = Smoothed moving Average of the median over 5-period

These values, called balance lines, are calculated and shifted into the future by an amount specified by the trader. If the moving averages themselves are depicted on the charts, the jaw will be blue, the teeth will be in red, and the lips will be green most of the time. In our graph, the smoothed moving averages (i.e. balance lines) are not shown.

The bars seen below the centerline in the chart above show the absolute difference between the red line and the green line with a minus sign. The upper bars, on the other hand, depict the difference between the blue and the red lines.More concisely.

Top bar = Jaw - Teeth

Bottom bar = - (Absolute value of (Teeth - Lips))

The indicators is then evaluated on the basis of the emerging green or red patterns.

Usage

In order to interpret this indicator, we must define three states of the indicator bars.

Gator Awaking

Signifying the completion of a cycle, when the bars display different colors (any combination of red and green), the gator is 'awaking'.

Gator Eating

When both the bar below and the one above the centerline are green, the indicator is said to be eating.

Gator Satisfied

When, after an 'eating' phase, the one of the upper or lower bars around the centerline turn red, the Gator is said to be sated.

Gator Sleeping

When both bars above and below the centerline are red, the gator is sleeping.

The indicator is then interpreted on the basis of a hypothesis that each phase of the trend has a life cycle of its own, indicated by the awaking-eating-stopping-sleeping of the gator. When a phase of the trend is at its incipient stages, we will observe that the gator is waking, that is, one of the upper or lower bars will turn green. After that, as the trend accelerates and reaches its climax, we will note an increasing number of 'double greens' where both the upper and the lower bars are green. This is the eating phase. As the phase runs out of energy, and begins to slow down, one of the previously green bars will turn red, signalling that the gator is sated. And when both bars are red, the phase has ended, anticipating a new cycle.

Trading with this indicator is simple and easy. In general you open a position as the bars contract and show different colors; then maintain the position until both bars turn red, and exit to take profit. And alternative, more conservative way of using the oscillator is placing the take-profit order at the satisfaction phase. In this manner, while there is chance that some of the potential of the trade will be left unrealized, we are able to capitalize on the most violent phase of the mini trend with shorter time exposure to the market.

Conclusions

The main problem with this oscillator is its complicated nature. It is essentially a combination of three moving averages, and whether the addition of the graph at the bottom contributes much value, or merely complicates the picture will probably depend on your trading style. If you depend on moving averages in trading trends, the gator is a suitable tool for balancing and condensing your strategy. All the problems of trading with a moving average must be taken into account while a trader is making use of the Gator indicator. If you make use of other tools, such as the MACD, and do not favor simple moving averages, theGator may not provide a lot of additional value.

The main advantage of the Gator indicator is the compactness of its display. Instead of drawing three separate SMMAs on the chart, we have all the information provided by them packed into the bars below, which leaves enough space for the application of any number of additional indicators onto the price data.

We will conclude by repeating that the oscillator is suitable to trending markets. It is most harmonious with Fibonacci levels, or support/resistance lines due to its tendency to be volatile and unpredictable.

Developed by Donald Lambert and first made public in 1980, the commodity channel index is a well-known tool used by some commodity and forex traders for identifying secular moves, and trading them.

The CCI has a crossover line at zero, and an overbought level at 100, while values below -100 are regarded as signaling an oversold condition. The CCI is an oscillator.

Note: Past performance is not indicative of future results.

Here we see the indicator in action in the price chart above. It is interesting to note that the CCI gives many false signals even at extreme values. For example, the lowest value for our indicator, at -283.576 was recorded during a very minor, and passing bottom on the chart. As with most high sensitivity indicators using the ATR requires a lot of practice and patience in mastering it.

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