Binary Golden Strategy: Trading strategy based on the Alligator indicator in PocketOption

Trading strategy based on the Alligator indicator

Let us consider the indicator called the Alligator. The popularity of this indicator is due to the fact that it signals the beginning of trend movement. However, using the Alligator alone as the main indicator is quite difficult, since it rarely gives signals directly for the opening of a trading position. The indicator lines can easily be used on their own - as resistance or support lines. Apparently, the developer of this indicator was a romantic person, therefore he described the work of his brainchild as follows:

• 1) The alligator is sleeping - it is a situation where all the indicator lines (jaws, teeth and lips) are intertwined and arranged horizontally. The alligator usually sleeps during a flat market. The longer it sleeps, the hungrier it is upon awakening. This description is quite consistent with the theory of technical analysis - the longer the lateral movement or the period of price consolidation, the more the price will move subsequently.
• 2) The alligator wakes up - it is a situation when the indicator lines are weakened, it is starving and therefore begins its hunt for the price. As the distance between the lines increases, we are saying the alligator is opening its mouth. Thus, the direction in which the mouth opens is the direction of the trend.
• 3) The alligator is full - it is a situation when the indicator lines get closer to each other and the mouth closes. It is believed that in this case, the alligator is full and plans to sleep, in order to "digest" the price. Closing of the alligator's mouth is a strong signal about the completion of the current trend. At such times it is tradeter to close the current positions and expect the next alligator's hunt..

Signal of strengthening of the bearish trend - opening of the alligator's mouth

The signal to open a position is the price chart passing through the slow line of the alligator's jaw. In this case, the confirmation of the trade direction is the closing mouth, i.e. the intersection of the slowest line and both fast lines (tongue and teeth).

Trader's actions when the signal is formed:

• 1) Add the Alligator indicator to the chart

  

   

• Adding the indicator to the chart

  Setting up the indicator's parameters

• 2) Wait for the intersection of the price chart and the slowest indicator line (the jaw, red in the figure);
• 3) After crossing of the fast lip line and the slow jaw line, i.e. after closing the mouth, you can buy the option in the direction away from the jaw line.

Signal of the end of the bullish trend - closing of the alligator's mouth, you can buy a put option

Advanced use of the Alligator indicator

As already noted, the lines of this indicator can be used as support and resistance lines. When the price reaches the fast lip line (purple in the figure), a signal may emerge for opening a trade on rebound. A strong signal occurs if the jaw line is not broken through.

Trader's actions when the signal is formed:

• 1) When the current candlestick closes on the lip line of the alligator or behind it, the probability of a signal appears;
• 2) The signal is the formation of a candlestick away from the alligator lines, a strong signal is the closure of this candlestick just before the lip line;
• 3) If the signal is confirmed by closing of the next candlestick in the same direction, you can purchase an option in the direction of the rebound from the indicator.

 

Signal to buy a call option after a rebound from the lips of the alligator