Before reading this lesson, you should have previously read through:

The Gator oscillator is very similar to the Alligator indicator in that it helps detect trend changes in an asset's price. The main difference between the two is that while the Alligator uses moving average lines, the Gator uses a histogram.

The Gator oscillator helps to identify four phases in a trend's life cycle: forming, strengthening, running out of momentum and exhausted. It helps you jump on trends as they form and exit them before they end.

The Gator indicator is based on the principle that trends – just like a living (alli)gator – go through four different phases:

  1. Sleeping (exhausted)
  2. Awakening (forming)
  3. Eating (strengthening)
  4. Sated (running out of momentum)

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Green bars indicate strengthening of a trend, red bars weakening

The Gator oscillator appears in a separate box underneath the asset's price chart as a histogram made up of green and red bars. Each time period is represented by two bars, one on top of the other. Sometimes they are both green, sometimes both red and sometimes they are both colours.

A green bar indicates that a trend is becoming stronger than previous price action, while a red bar indicates it is becoming weaker.

A green bar indicates that a trend is stronger than previous price action, while a red bar indicates it is weaker than previous price action.

The image below shows how the Gator oscillator appears on a chart:

Gator oscillator 1

The gator's four phases

The following shows you each of the four phases:

Sleep phase

During the Gator sleeps phase, both bars are red.

The chart below shows this in action:

Gator oscillator 2

number_1 The Gator sleeps phase

Awakening phase

The Gator awakens phase follows the Gator sleeps phase and can be recognised when one of the red bars turns green. It does not matter whether the red or green bar is above or below the zero line, as long as there is one of each.

The chart below shows this in action:

Gator oscillator 3

number_2 The Gator awakens phase

Eating phase

During the Gator eats phase, both bars turn green again.

The chart below shows this in action:

Gator oscillator 4

number_3 The Gator eats phase

Sated phase

The Gator's sated phase follows the Gator eats phase and occurs when one of the green bars turns red. Again, it does not matter whether the green or red bar is above or below zero, as long as there is one of each.

The chart below shows this in action:

Gator oscillator 5

number_4The Gator is sated phase

You can practice identifying the 4 stages of the Gator oscillator in the exercise below:

Mark the 4 stages of the gator oscillator Show exercise

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Enter trades as Gator awakens

When using the Gator oscillator, you will typically look to enter a position during its awakening phase, hold it through the eating phase and then look to exit your position and take profit during the sated phase as the trend nears completion.

Enter trades during a trend's awakening phase, hold them through the eating phase and exit them during the sated phase.

As the Gator oscillator is based on a system of moving averages, be aware that there may be a time lag between price changes and the indicator moving into its various phases.

Also, note that the Gator oscillator only tells you how strong or weak a trend is. It does not tell you in which direction prices are likely to move. It should therefore be combined with other indicators or a set of rules to determine which direction the trend is in.

Best used on medium to higher time frames

The Gator oscillator works well in all market conditions as it is designed to identify each phase of the market's cycles.

It is best used however on medium to longer time frames.

Practice identifying the different stages

You can practice identifying the different stages of the Gator oscillator in the following excercised:

Exercise 1: What stage of the Gator oscillator is highlighted? Show exercise
Exercise 2: What stage of the Gator oscillator is highlighted? Show exercise
Exercise 3: What stage of the Gator oscillator is highlighted? Show exercise
Exercise 4: What stage of the Gator oscillator is highlighted? Show exercise

Summary

In this lesson, you have learned ...

  • … the Gator oscillator is an indicator that helps detect trend changes in an asset's price.
  • … it is based on the principle that trends go through four different phases: awakening (forming), eating (strengthening), sated (running out of momentum) and sleeping (exhausted).
  • … it appears on charts as a histogram made up of green and red bars.
  • … each time period is represented by two bars, which can be either both red, both green or one of each colour.
  • … a green bar indicates that a trend is stronger than previous periods, while a red bar indicates it is weaker than previous periods.
  • … during the Gator sleeps phase, both bars are red.
  • … the Gator awakens phase follows the Gator sleeps phase and can be recognised when one of the red bars turns green.
  • … during the Gator eats phase, both bars turn green again.
  • … the Gator's sated phase follows the Gator eats phase and occurs when one of the green bars turns red.
  • … traders typically look to enter a position during the indicator's awakening phase, hold it through the eating phase and exit it during the sated phase.
  • … there may be a time lag between price changes and the indicator moving into its various phases.
  • … the Gator oscillator only tells you how strong or weak a trend is – not in which direction prices are moving.
  • … it works well in all market conditions as it is designed to identify each phase of the market's cycles.
  • … it is best used on medium to longer-term time frames.
  • … if used on lower time frames it may produce false signals.

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  • Hi, guys.
    I have paying around with gator and alligator indicators but I am still puzzled about something: why do the gator and alligator charts appear to be plotted two bars into the future? Which bars do you take for signals? The "now" shift=0 bar or the "future" shift=-2 bar?
    Thanks for any expert there who could explain me this.
  • Hi Mekicevica,
    The fact that they are shifted is most probably an optimization to avoid two undesirable effects: premature signals and the lag.
    Always the current closed bar needs to be taken as signal, see exercises above.
    Hope that answers your questions.
    Regards.
    Peter
  • Thanks, for your help. I'll check the exercises in more detail.

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