Today the trading system Alligator is very popular among thousands of traders working in the binary options market. It is based on the indicator of the same name, built using three moving average lines. There are several methods to interpret the data obtained with its help. In this article, we offer you the simplest and most reliable Alligator strategy for binary options.
The Indicator – General Characteristics
The Alligator indicator is formed by three colored moving average lines. You can build it yourself using the parameters below or trade using the system under consideration on the electronic platform. The fact is that this broker has in its functionality a ready-made Alligator indicator with all the settings.
Each curve has it’s period and offsets coefficient. Averages movement is based on the average price of the basic asset. Side price movement or flat shows by crossing the lines. When a steady upward or downward trend prevails in the market, they move in parallel.
By moving, red, green and blue lines form the so-called Alligator’s Jaws, which changes its configuration, focusing on the market situation.
Alligator’s jaw (Челюсти аллигатора) is a balance moving average line, colored blue. It is characterized by the longest period of 13 and an offset coefficient equal to 8. This line is responsible for indicating a stable trend in price movement. If there is a growing trend in the market, the blue curve is located under the price level. If a downtrend prevails, the curve is placed above the price level.
Alligator’s teeth (Зубы аллигатора) are a red moving average line. It has an average period of 8 and an offset coefficient of 5.
Alligator lips (Губы аллигатора) are an additional guide for the trader when trading binary options. It is a green line, which has a period of 5 and an offset coefficient of 3.
Alligator’s Dream is a market situation where indicator moving averages merge in a live chart. Moreover, lines on such sections can be twisted, intertwined with each other. Such a position is an unambiguous signal for a trader of a flat or sideways price movement on the basic asset.
The longer you see an Alligator’s Dream on the quotes chart, the stronger the next price jump will be.
The natural position of the lines can be described by the sequence blue-red-green. The parallel movement of moving averages located above the price level is typical for a downtrend. Position under price level is typical for an uptrend.
A trader will only be able to make a profit if he or she opens a trading position when the curves diverge, i.e. at the very moment when the Alligator wakes up.
How does the strategy work?
The trader should make a trade on the rise, i.e. click on the Call button, if the green curve crosses the blue one when moving from bottom to top. To make sure that the received signal is true, it is necessary to wait for the full closing of two Japanese candlesticks on the quotes chart. In a situation when the second candlestick goes to the trend reversal, you should not make a deal.
The trader should make a down trade, i.e. press the Put button, in case the green curve crosses the blue one when moving down from top to bottom. Now it is necessary to get the confirmation by the above-described method of consecutive closing of two candlesticks with saving the dynamics of the downtrend. In a situation where the second candlestick signals a possible trend reversal, you should not open a trading position.
First of all, remember that when using the Alligator strategy, trading signals most often come immediately after the divergence of moving averages.
Operation and Money management
For beginner traders, we will give the necessary explanations. In binary options trading, the expiration time is commonly understood as the time interval for which the trade is concluded.
The Alligator strategy is a universal trading system. When using it, the expiration time of transactions can be any. As practice shows, it gives the best results in combination with short timeframes. We recommend you try out the considered trading system first of all on positions open for 60 seconds and 5 minutes.
Money management is a theory that teaches traders how to properly manage the money that is in a client account. Remember that bets in binary options should not be too high. Try to make trades for amounts that are equal to 2-3% of your current deposit.