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Thread: Alligator indicator

#Alligator #Indicators #Definedge

 Alligator indicator is created by Bill Williams. He was a popular trader and author.

Before we discuss the indicator, let us understand an important concept.
Here is a chart showing 10 day moving average at bar A. Price of the stock is 100, Moving average price is 90.
What if we shift this moving average to 5 bars further? See the chart below.

Moving average at bar B is moving average price of bar A (5 candles behind). This is shifting of moving average price. What does it mean?
Simple explanation is – shifting the moving average can help one compare current price with past period moving average easily. It results in smoothening instead of increasing the moving average parameter. This is also known as Forward Displaced moving average.
Displacing the average could be an interesting experiment. This concept is also used in many other indicators including Ichimoku cloud. Here is the link that explains Ichimoku indicator.

https://t.co/WkNxKU9n8u

Let us discuss the Alligator indicator.
First step is to plot three simple moving averages or the Triple moving average.

Williams suggested Fib numbers 13, 8 and 5 period averages.

The averages are calculated on median price.

Median price = (High + low) / 2.

So, there are three lines plotted on the chart.
Next step is to shift all these moving averages to future bars.

13-period MA is shifted by 8 bars
8-period MA is shifted by 5 bars
5-period MA is shifted by 3 bars

So, default parameters of Alligator indicator are 13,8,5 and 8,5,3.
Williams called it Alligator. He used the following terminology to describe these averages:

The 13-period MA to 8 (13,8) is called as Alligator’s Jaws.
8-period MA to 5, the Teeth and
5-period MA to 3, the Lips.
Behavior of the indicator:

When three lines are close to each other, the Alligator is sleeping.

If the Lips crosses the Teeth and Jaws upward or downward, the Alligator is waking up.

If Price crosses above or below the three lines, the Alligator is eating.
Basically it means:

When three lines are close to each other, there is no clear trend.

When short-term average crosses other two upward or downward, the trend might emerge.

When three lines are trending, and price is above them, then it indicates strong uptrend.
When the three lines are trending, and price is below them then it indicates strong downtrend.

Over a period, market trends roughly 20% – 30% times, it remains in a range rest of the time.
We should not be trading markets when Alligator is sleeping, monitor when it is waking up and trade when it is eating.

If Alligator sleeps more (long consolidation), it will become hungrier and eat more (Strong trend).
So, basically Alligator indicator is forward displaced triple-moving average. It smoothens the averages, but it also increases the lag in the indicator.

There are two important observations on this indicator which I found useful:
1 – Three averages close to each other: there is a possibility of strong trend to emerge. Trade breakouts.

2 – Price low is above three averages and all averages are rising = Strong up trend. Price high is below averages and all averages are falling = strong downtrend.
Ignore other bars. With this approach, you will trade mostly clear trends.

These readings are also possible using other indicators and charts. Idea was to talk about the concept.
It can be compared with triple moving average, Alligator shifts the moving averages.

My best take from the indicator is concept of shifting the moving average to explore further, and that we can divide price in to bullish, bearish, and neutral phase using averages.
Understanding of the concept and principles behind the techniques helps a lot in the long run. We cannot use all the indicators, but we can learn the logic behind those methods that can give us more ideas or improving on what we are doing currently.

More from Prashant Shah

Prashant Shah
Prashant Shah
@Prashantshah267
Thread: Central Pivot Range (CPR)

CPR is another popular tool. Three lines are plotted on the chart when we plot CPR.

The three lines are: CPR, TC and BC.

Let’s understand the calculation.


You may recall that I explained the calculation of Pivot levels in an earlier thread. CPR stands for Central Pivot Range. It is always a center line of the three lines that gets plotted in the chart.

CPR is a Pivot price. Pivot is average of HLC as explained in the prev thread.


We also discussed about Mid-range of the session. Mid-range is average of High and low price of the session.

The mid-range of the bar is known as BC in the CPR calculation. BC stands for Bottom central pivot.


Pivot level captures the relationship of the closing price to the range of the session.

Pivot price above mid-price = bullish pivot
Pivot price below mid-price = bearish pivot


So, CPR line is Pivot and BC line is Mid-range.

What is the difference between both?
Mid-range is average of High and Low.

Pivot is average of High, Low and Close.
What will make the difference between the two?

Close.
FINANCE , LEARNING
Prashant Shah
Prashant Shah
@Prashantshah267
Back-testing of some candlestick patterns 🧵

I hv back-tested patterns shown below on 500 stocks (Nifty 500 stock group as on today) since inception on daily timeframe charts.

Below is some interesting information.


I was doing to design multi-chart setups. But the information in the thread can be useful for people practicing candlestick chart patterns. There are many patterns & we keep coming across more. The data can give you a rough idea about the past performance of patterns.

Patterns are defined based on the popular rules of identifying them. I have also tested bearish patterns for bullish trades and vice versa (Contra approach).

Criteria: Hit ratio & returns of pattern giving 1:1 risk-reward if the entry is at the closing price of the pattern.

Some top bullish patterns have below hit ratio:

Inverted Hammer or Shooting Star – 74.72%
Multi-Harami breakout - 65.23%
Bullish Harami cross – 64.6%
Bullish Kicker – 63.53% (Got better returns)
Bullish separating line – 61.69% (It has got better returns)


Doji breakout hit ratio is decent (63.71%) but occurrences are v high so need more confirmation.

Engulfing and Harami patterns have got better returns when traded at next candle of confirmation.
ALL
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Prashant Shah
Prashant Shah
@Prashantshah267
Thread: 5 Important bullish & bearish chart patterns in technical analysis.

Triangles, Broadenings and Rectangles.

#trading #investing

Many traders analyse and practice western chart patterns. There are many such patterns and enough is talked about them in various books and resources.
Long back, I read a book “Encyclopedia of Chart Patterns” by Thomas N. Bukowski. It’s a brilliant work (Must read).

He backtested many patterns & ranked them based on their performance. Most imp is that he separated the patterns based on their performance in uptrend & downtrend.
I read about those patterns at many other places & in different theories and I realised that most of them are-

-variations of broad category of patterns. I have bifurcated these patterns in various categories.

Triangles, Broadenings & Brackets or Rectangle patterns are most common & effective patterns. Below are 5 bullish & bearish proven, time-tested patterns of these categories.

Bullish Patterns:
Rectangle Breakout:
Horizontal pattern breakout. Price remains between two horizontal lines before upward brkout. Its a decent continuation breakout pattern when appears in uptrend. Reversal pattern when appear in downtrend (Decent Risk-reward). Tend to pullback
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Prashant Shah
Prashant Shah
@Prashantshah267
Thread: Super trend indicator:

Developed by Olivier Seban, Super trend is an indicator plotted on the price chart like a moving average.


Let us discuss three important components of this indicator.

1: Range-price.

In every bar or candle, we have four prices - Open, High, Low, Close.

We have the option to select any price of above to define the trend.

For example, we may define an uptrend as today’s close being above yesterday’s close.

We can also calculate range price of every bar. It is also known as Average price or Mid-price.

Range price = (High + Low) / 2


Have a look at the images below.

In the first Image below , the closing price of each candle is connected to the closing price of the next candle.


In the below chart, the “range-price” or the mid-point of each candle is connected.
SUPERTREND
Prashant Shah
Prashant Shah
@Prashantshah267
Nifty and RSI divergence. It is all about knowing your indicator well. Quick video (Hindi) :-)
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Parveen Bhansali \U0001f1ee\U0001f1f3
Parveen Bhansali 🇮🇳...
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🥏Lots of my followers were asking or interested in knowing abt d name of stocks i holds in my non core portfolio for long term.
🥏I m sharing d list below. Do ur own due diligence before investing. 🥏Some of the stocks in the list i feel can create immense wealth in next 10 yrs.
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Tar \u26a1
Tar ⚡
@itsTarH
It's the weekend!

Grab a cup of coffee, in this thread I will explain

1. Peter Lynch's Six Categories of Stocks
2. How to identify the type of stock you own?
3. How to think and decide about the runway for growth of a company?

Lets dive right in.


For those who do not know (I doubt there will be many), Peter Lynch is one of the most successful fund managers of all time.

He managed a fund called Magellan at US Investment Giant Fidelity Investments and during his 13 yr tenure, he delivered an average CAGR of 29.2%.


Sadly the fund couldn't keep up post Lynch's retirement and his successors weren't able to keep up with his returns.

That's how good Lynch was!


In 1989, a year before retirement, Lynch wrote and published a book called 'One Up on Wall Street'.

Almost 32 years later, the teachings of the book remain relevant.

(Highly recommended read)


Chapter 7 of the Book Titled
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talks about the need to classify stocks.

Peter's argument is that you need to know what kind of stock you hold in your portfolio.

Not all stocks are the same - and he is right!
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Colibri Trader
Colibri Trader
@priceinaction
MACD and how I use it
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ProdigalTrader
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Thread on Importance of Mean Reversion

U must have remember the charts of auto sector breakout on last monday,potentially poised to be the next leader in the rally.
But since then it just fell bad and deep
Breaking the breakout bar low

1/7


The seemingly convincing breakout retest structure in abv daily chart takes a cocpletely different picture in u open the chart in weekly TF

shooting start at the resistance line of a triangle and at a major supply zone

2/7


Major stocks such as heromoto, maruti, eichermot and babajauto are already trading below the breakout level it established on monday when sector broke out

3/7


This poses a serious question on the risks associated with breakout.

Popularity behind the breakout is the fact that it doesnt need any skills to spot it, even a 90% blind man can spot it in any chart, because the price just sticks out from the rest by a very big margin

4/7

But think about a completely diffferent method where the price makes a clean move and the risks assicated with it is cubstantially less.

Price available so cheap and at support

5/7
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Trader knight
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@Traderknight007
How to use Moving averages like a Pro.👇

https://t.co/7VbuGovmee
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Do Retweet If you If it Useful

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• How to find direction
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• How to deploy capital
• Exit criteria
• What ROI he targets weekly
• What % risk he takes

Done with the help of @niki_poojary


How @Mitesh_Engr Sir finds the direction?

• Daily charts S/R
• 75 min charts S/R
• Intraday trend
• Always play directional
• Never trades in strategies


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Position Sizing by @Mitesh_Engr Sir.

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Keep dwelling on this:
Further Examination of the Motif near PRRA Reveals Close Structural Similarity to the SEB Superantigen as well as Sequence Similarities to Neurotoxins and a Viral SAg.

The insertion PRRA together with 7 sequentially preceding residues & succeeding R685 (conserved in β-CoVs) form a motif, Y674QTQTNSPRRAR685, homologous to those of neurotoxins from Ophiophagus (cobra) and Bungarus genera, as well as neurotoxin-like regions from three RABV strains

(20) (Fig. 2D). We further noticed that the same segment bears close similarity to the HIV-1 glycoprotein gp120 SAg motif F164 to V174.
https://t.co/EwwJOSa8RK


In (B), the segment S680PPRAR685 including the PRRA insert and highly conserved cleavage site *R685* is shown in van der Waals representation (black labels) and nearby CDR residues of the TCRVβ domain are labeled in blue/white
https://t.co/BsY8BAIzDa


Sequence Identity %
https://t.co/BsY8BAIzDa
Y674 - QTQTNSPRRA - R685
Similar to neurotoxins from Ophiophagus (cobra) & Bungarus genera & neurotoxin-like regions from three RABV strains
T678 - NSPRRA- R685
Superantigenic core, consistently aligned against bacterial or viral SAgs
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