Forex Alligator-MACD Trading System and Strategy – My system is very simple. I use only one chart to enter, manage and exit the trade. My charts are clear and there are MACD (Moving Average Convergence-Divergence), Alligator, and DMI indicators.
You’ll learn more about how I use these indicators later on. As long as you can recognize the difference between the colours, yellow and blue, you won’t have a problem trading it.
You could say that my system is a swing trading method, but I also use it to scalp for some pips when the requirements are met.
Basically, with this system, you can enter a trade when a trend is just beginning, re-enter another trade when the trend continues, enter counter-trend trades, and trade in conjunction with Divergence.
I usually aim for 10 to 40 pips depending on the type of entry technique I use. However, you’ll soon discover that you can gain more than 40 pips for many trades.
Alligator is an indicator designed to signal a trend absence, formation and direction. Bill Williams saw the alligator’s behavior as an allegory of the market’s one: the resting phase is turning into the price-hunting as the alligator awakes so that to come back to sleep after the feeding is over. The longer the alligator is sleeping the hungrier it gets and the stronger the market move will be.
How to Use Alligator Indicator
The Alligator indicator consists of 13-, 8- and 5-period smoothed moving averages shifted into the future by 8, 5 and 3 bars respectively which are colored blue, red and green representing the alligator’s jaw, teeth and lips.
The Alligator is resting when the three averages are twisted together progressing in a narrow range. The more distant the averages become, the sooner the price move will happen.
The averages continuing in an upward direction (green followed by red and blue) suggest an emerging uptrend which we interpret as a signal to buy.
The averages following each other in the reversed order down the slope are a strong signal of an unfolding downtrend so selling at this point would be more than appropriate.
- When the Yellow MACD starts crossing up above the blue MACD, I will enter a buy trade. Even if the setup occurred 2-3 bars before, it is still valid, but I exercise caution when entering these positions. The reverse is true for Sell Trade setups. The safest trades occur when the yellow MACD is above the 0 level and the blue MACD is also above 0 or moving towards the 0 line.
- Super Candles green
- Alligator Indicator- The averages continuing in an upward direction (green followed by red and blue).
- ADX upward avove 20 line.
What’s good about this system is that there are different ways to enter a trade, so trade setups are really not hard to find. It is simple and easy to follow. As long as you trade by the rules, you will be able to appreciate how profitable it can be.
When you first use this system, test it on a Demo account before trading a Live account. It will help show you how the system works and what to expect. Practice constantly, and when you have made satisfactory results, that’s when you switch to trading real money. This will prepare you mentally and psychologically to trade live.