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How to Use Gator Oscillator For Forex Trading

Gator Oscillator helps in identifying a trending or consolidating market. It can analyse a trend’s strength and even identify new trends through price convergence and divergence. In this article, we take a look at everything you need to know about the Gator Oscillator.

What is Gator Oscillator?

The Gator Oscillator is a Bill Williams indicator that helps recognise the degree to which a market is trending. It works best with the Alligator indicator (another Williams indicator that uses moving averages to determine the changing trends in the market) and its three balance lines. These lines are the Simple Moving Averages that are calculated over different time periods as follows –

  • The Green Alligator’s lips is calculated as a 5-period Simple Moving Average and shifted 3 bars ahead.
  • The Red Alligator’s teeth is calculated as a 9-period Simple Moving average and shifted 5 bars ahead.
  • The Blue Alligator’s jaw is a 13-period Simple Moving Average and shifted 8 bars ahead.

These lines are used to calculate values that help form a dual histogram. Both histograms are plotted on either side of the zero line, above and below. They are placed below the price chart and help in understanding the ongoing market trend. The absolute difference between the jaws and teeth is the positive value, drawn as blue and red lines above the zero line. The negative value is the absolute difference between teeth and lips, drawn as red and green lines below the zero line. The more extreme the value (at the maximum or minimum of the histogram), the stronger the trend and vice versa. Differently coloured bars signify different market conditions as follows –

  • A Gator Eats situation is formed when there are green bars on both sides of the zero line (bullish market sentiment).
  • A Gator Awakes situation is formed when there are differently coloured bars on both sides of the zero line (consolidating market).
  • A Gator Sleeps situation is formed when there are red bars on both sides of the zero line (bearish market sentiment).
  • A Gator Fills-Out situation is formed when there is only a single red bar occurring on either side of the zero line during the Gator eats phase.

How to read the Gator Oscillator

In a price chart with the Gator Oscillator window, both green and red bars appear around the zero line. It shows both positive and negative values of the oscillator together, above and below the zero line, respectively. There are four phases in the Gator Oscillator indicator, and here’s how you can read them –

  • The eating phase depicts that there is a trending market and suggests you keep your positions open throughout the trading period. In this phase, the moving averages are spread across different price levels and provide ideal entry levels to keep your existing positions open and enter new ones.
  • The awakening phase depicts that a new trend is forming and an old one is ending. The moving averages in this phase widen more than before, and the indicator determines what direction these moving averages can lead the market in the future. This phase can also be termed a reversal phase and provide ideal entry or exit levels in bullish reversal or bearish reversal, respectively.
  • The sleeping phase refers to a situation with no trend. This means that all the moving averages are crossing one another without any clear direction. In this situation, you are suggested not to open any new positions. Instead, you should wait until a clear trend direction forms.
  • The filling-out phase is also known as the stated phase, which means that the trending market is now slowing down. This can also mean that the existing trend is coming to an end, so you should buy or sell positions accordingly. If an uptrend is ending, you are signalled to sell, and if a downtrend is ending, you are suggested to buy to profit from the new upcoming trend.

How to trade with Gator Oscillator

  • Download the Gator Oscillator indicator and add it to your trading price chart.
  • Set the value of periods for the teeth, lips and jaws manually or select the default values as suggested.
  • Click the ‘ok’ button once you have chosen your values.
  • After your values are set, your indicator will be launched and integrated with the price chart.
  • Identify the two histograms below the price chart and determine the positive and negative values above and below the zero line, respectively.
  • If you witness a sleeping Gator, stay out of the market and wait for a stronger trend to form.
  • After sleeping, the Gator is finally awake and indicates that this is time to enter the market.
  • As the trend continues in the same direction, the eating phase starts, where you can take more positions in the same direction as the market.
  • Thereon, if you witness a red bar amongst the green bars after continuing in the market, it signals that now is the time when the Gator is filled up, and you need to exit the position before the trend ends.
  • Wait for a new trend to begin as per the Gator’s bars before entering any new position.

Use the Gator Oscillator in your trading strategy today

You can take the help of the Gator Oscillator to identify new trends in the market before they are formed. You can use the indicator to place ideal entry or exit orders by identifying how much a trend has progressed. Start trading with our forex trading platform today to add the Gator Indicator to your price charts. Sign up for a live trading account or try a risk-free demo account on Blueberry Markets.

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