Developed by Bill Williams, the Gator oscillator tells about the trend’s direction in multiple phases. It is a supplement to the Williams Alligator indicator and is often alongside the indicator.
This guide will talk about the Gator oscillator and how to use it in trading strategies.
Definition
The Gator oscillator is an indicator that plots a histogram below the chart to indicate the trend’s direction. It works similarly to the Alligator indicator. The difference is Alligator indicator uses Smooth Moving Averages, while the Gator oscillator uses a histogram. The histogram’s green and red bars help determine the market move.
Gator uses the convergence/divergence of the three lines from the Alligator indicator to highlight the market trend.
The three lines are called the Alligator jaws, teeth, and lips. These three lines are based on moving averages and show the market momentum.
Like many other oscillators, the Gator oscillator uses the zero line. Gator will be above the zero line if the overall trend is positive. Conversely, if there is a negative trend, the oscillator will be below the zero line.
How to use the Gator oscillator?
The Gator oscillator is used in combination with the Alligator indicator. The Gator act as signal confirmation for the Alligator indicator.
The zero line is the most important element of the Gator. When the histogram bars move up and below the line, it suggests a strong move.
If the Gator bars are above the zero line, and the Alligator indicator blue line (jaws) and the red line (lips) are above the price, it indicates a stronger downtrend.
On the other hand, if the gator bars are below the zero line and the Alligator indicator green line (teeth) is below the price, it signifies an uptrend.
Four phases of the Gator oscillator
Bill Williams developed all his indicators on the different phases of Alligators. These phases are eating, sleeping, awakening, and sating.
1. Sleeping phase
The sleeping phase appears when the bars are red. It signifies that there is no trend.
2. Awakening phase
In the awakening phase, when bars are in red and green colors, it suggests that the Alligator is wakening up for a trend. Here is when the indicator presents an entry point.
3. Eating Phase
The eating phase appears when bars are green. It suggests Alligator eating, meaning the trend will continue, and you should keep your positions open.
4. Sated Phase
The Alligator falls into the sated state after eating. In this phase, bars have different colors above and below the zero line. It marks slowing the market, and you can exit your positions here.
Gator Oscillator Trading Strategy
For the Gator oscillator strategy, it’s better to apply the Alligator indicator. However, you can apply other indicators also.
For the trading strategy, you need to follow certain rules. In a trending market, you need to enter when the green bars are rising and the Alligator lines are below the price; it indicates a strong uptrend.
On the flip side, if the red bars are rising and the Alligator lines are above the price, it is a strong downtrend.
Some people are confused about letting your trades open with the Gator. Remember that when the indicator shows green bars above and below the zero line, it marks an eating phase.
As mentioned earlier, when you see the eating phase, you let your trades run, as there is a strong chance of trend continuation. When the Alligator is hungry, you don’t have to mess with it.
Although the Gator Oscillator works for reversal strategies, it’s better to apply the indicator for trend continuation strategies.
Open buy trade
- Identify the market trend with the help of the Alligator indicator.
- Enter the trade when the green bars start rising.
- Place a stop-loss at the previous low from the entry point.
- Set take-profit at the previous high or exit the trade when the bars start changing colors.
Open sell trade
- Identify the market trend with the help of the Alligator indicator.
- Enter the trade when the red bars start rising.
- Place a stop-loss at the previous high from the entry point.
- Set take-profit at the previous low, or exit the trade when the bars start changing colors.
Bottom line
The Gator oscillator helps determine the trend’s direction. The four phases of the oscillator tell you when to enter or exit the trade.
Although you can use the Gator, combining it with the Alligator indicator is better.