Williams Alligator Chart Setup For ThinkOrSwim

Gabrielx77

Active member
I hope it helps anyone who's looking for a new strategy when it comes to trading.

The reason why I was looking for a script for this Alligator Strategy was because I read into someone using it with great success; it seemed very easy to follow and very concise, even when I looked back at the previous entry and exit points from months ago.

Basically, with this strategy, you would wait until the 5 ma crosses under or over both the 8 ma and the 13 ma; but as you can see in my picture, you would've missed most of the move. After reading more into this strategy, I found someone who has found a solution for not having to miss the move.

In the picture you will see:

1. 3 Smooth Moving Averages: 5 with -3 displacement (green) 8 with -5 displacement (red) and the 13 with a -8 displacement (blue)
2. Two Ovals: 1st one being my entry point and the 2nd being my exit point
3, Magenta Down Arrow: Representation for when the 5 ma crosses under both the 8 and 13 ma

As I said before, usually your entry point would be when the 3 moving averages cross, but you would miss most of the move; the exit would be when the candles close back into the moving averages (aka the gator).

To avoid the miss of the move, you would want to enter the trade when the candle crosses and closes above or below the whole gator instead. At the same time, you would need to make sure your MACD is following the trend of the candle. As you can see, the MACD is converging towards the down side, which means it's a strong signal and you can buy.

Traded options the other day on the SPY, and although the trade took up some time, the result was about a $125-$150 gain per contract.

V5J2cvb.jpg


I got this specific strategy from a user on reddit that goes by: rogerdog1 if anyone was wondering.
 
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@Gabrielx77 The Alligator indicator is popular with novices for several reasons... First, it is easy to understand... Second, it is fairly safe and reliable... However, the indicator does have some deficits as well... The main negative is that entry signals are somewhat to considerably later than other indicators, as are exits... While a late entry helps reduce false signals it also cuts into potential profits...

If you choose to use the Alligator indicator for trade entries you would be better off using another method to determine your trade exits... This is a common problem with most all moving average crossover indicators... One exit option would be to use a profit target so you can, hopefully, exit while the price is rising rather than trying to catch a falling knife... Another exit option would be something along the lines of a trailing stop to limit potential profit losses...

I have run backtests on the Alligator indicator and other moving average indicators and if you rely on the crossovers for entry and exit you will not end up with a profitable overall trading strategy... Just my two cents...
 
@rad14733 Yes I totally agree with you! That's why I focus on the candles closing above or below the averages to take the trade. If you look at my picture, my entry was when the candle closed below all 3 moving averages (the first oval), which was before the cross over, and then I scaled out of positions until I finally closed all remaining positions when my candles entered back into the alligator (the second oval). I never go solely based on an crossover, because yes, it's definitely too late for entries and exits. Instead, I use it as a zone correlating with MACD.
 
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@Gabrielx77

I saw that but I would have closed the trade as soon as the first red bar closed below the top green moving average line, which coincides with the MACD downward crossover... That's why I mentioned the trailing stop idea due to the fact that the trade had definitely weakened in trend... I prefer to base my exits off the high point of the trade but, then again, I scalp and day trade so I'm not going to wait and see if there is a rebound... And if there was a strong rebound I'd open another trade if there appeared to be momentum and the price not near recent highs... I've ridden trades from winner to loser waiting for rebounds that never transpired so now I tend to take the sure things... Just goes to show that traders have different trade criteria and expectations... You'll never go broke taking profits early... ;)(y)
 
@rad14733 100%; I actually did take profits on the close of that candle. I had bought 15 contracts and sold 8. I would've sold the rest if the green candle broke the previous red candles high, nearing my entry point, but it didn't so I held. I also scalp, so I understand what you're saying; when I closed my final position at the 2nd oval in my pic, I was only holding 3 contracts left.
 
Hello @Gabrielx77

How can I set my chart to look like the one in the above picture when I try to set my charts for 1 or 2 days the candlesticks get really large where I can’t use my indicators how can I chart stocks for a short period of time and the charts looks similar to the chart pictured above

04Ve4JD.jpg
 
@Eninerman9 Have you tried going to the Price Axis Settings icon (the dual squiggle lines) in the top right corner of your chart and toggled Fit Studies to see if that helps...??? Or am I not understanding what it is you are having problems with...
 
Very nice, Ben. Looks super clean and professional, I appreciate it. Also, I'd like to share some results that I back tested the other day, I hope it helps anyone who's looking for a new strategy when it comes to trading.

The reason why I was looking for a script for this Alligator Strategy was because I read into someone using it with great success; it seemed very easy to follow and very concise, even when I looked back at the previous entry and exit points from months ago.

Basically, with this strategy, you would wait until the 5 ma crosses under or over both the 8 ma and the 13 ma; but as you can see in my picture, you would've missed most of the move. After reading more into this strategy, I found someone who has found a solution for not having to miss the move.

In the picture you will see:

1. 3 Smooth Moving Averages: 5 with -3 displacement (green) 8 with -5 displacement (red) and the 13 with a -8 displacement (blue)
2. Two Ovals: 1st one being my entry point and the 2nd being my exit point
3, Magenta Down Arrow: Representation for when the 5 ma crosses under both the 8 and 13 ma

As I said before, usually your entry point would be when the 3 moving averages cross, but you would miss most of the move; the exit would be when the candles close back into the moving averages (aka the gator).

To avoid the miss of the move, you would want to enter the trade when the candle crosses and closes above or below the whole gator instead. At the same time, you would need to make sure your MACD is following the trend of the candle. As you can see, the MACD is converging towards the down side, which means it's a strong signal and you can buy.

Traded options the other day on the SPY, and although the trade took up some time, the result was about a $125-$150 gain per contract.

V5J2cvb.jpg


I got this specific strategy from a user on reddit that goes by: rogerdog1 if anyone was wondering.
What chart settings are being used to set a chart for trading like chart pictured above the SPY trade?
 

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