Understanding the Alligator Indicator in the PAMM Forex Trading

PAMM Forex Model with currency flying

Alligator is an indicator found by Bill Williams. It’s designed to determine market trends, based on time periods. As PAMM traders and PAMM investors, it’s a must to have their own style. Don’t be a copy cat of other traders. This particular style used in combining with a good understanding of the market are two basic and the most important things traders or investors should have before starting their trading. Understanding technical or fundamental analysis will not automatically make traders reach their goal which is gaining a maximum and consistence profit. Still, PAMM traders and PAMM investors have to deal with the unpredictable market and make a deep consideration before determining their decision. Alligator is one of the trend-folowing indicator that will help them forcasting the market trends.

The main goal of the Alligator is to know where the price tends to and how strong it is. In general, the Alligator movement has similar movement with the Moving Average. When it’s used in conjunction with the Stochastic Oscillator, it will help traders to estimate price changes.

Based on William’s theory, the Alligator is a combination of three Moving Averages which shows variety of time periods and movements. William calls these three Moving Averages as Balance Lines since they show the future values within the market where there are no other obstacle factors. Below is the formula of the Alligator:

  • Alligator’s Jaws: is the Balance Line of the Simple Moving Average in 13 periods within the median value which is estimating the price in 8 bars ahead.
  • Alligator’s Teeth: is the Balance Line of the Simple Moving Average in 8 periods within the median value which is estimating the price in 5 bars ahead.
  • Alligator’s Lips: is the Balance Line of the Simple Moving Average in 5 periods within the median value which is estimating the price in 2 bars ahead.

The jaws, teeth and lips of the Alligator reflect the interaction in different time periods. The point of this formula is: each balance lines (jaws, teeth and lips) must move in an orderly basis. They can’t cross-over to one another. If they are moving closer to one another or even crossing-over, it means the Alligator is sleeping. This is a so called ‘waiting period’. If you are a PAMM trader, you shouldn’t do any trading activities at this moment. All you have to do is waiting for the next signal, where the Alligator start opening its mouth again. One important rule: never feed the sleeping Alligator!

When Alligator wakes, the jaws will be opened and this means a good news for you to entry the market. If the jaws open upward, it’s a buying signal. While if the jaws open downward, it ‘s a selling signal. When Alligator is satisfied, it will start closing the jaws and the balance lines will move closer again. This is the time for you to stop trading and wait for the next signal.

Good luck and Happy trading using PAMM Investments system !

Don’t forget to read this important article for PAMM trader

1. How to become a PAMM Trader

2. Understanding your Forex Trader Level as PAMM Trader