# Gator Oscillator

The Gator Oscillator, in English Gator Oscillator, is a technical indicator developed by Bill Williams used to study stock trends and complement the Alligator indicator developed by the same author.

The Gator oscillator is used in addition to the Alligator indicator. It measures the convergence / divergence of the moving averages that make up the Alligator indicator. It is used to study the upward or downward trends of a financial asset. Thus, depending on the value taken by the histogram that represents it, it indicates the phase of the stock market trend in which the financial asset is located.

As we can see in the previous graph, the indicator is a histogram made up of green and red bars and a dashed central line. That center line is also called the zero line. In such a way that the bars (red or green) are built around that value.

## How is the Gator indicator calculated?

Derived from what we pointed out at the beginning, the Gator indicator is based on the Alligator indicator. In fact its formula is practically the same. Only instead of being represented on the chart, as in the Alligator indicator, the calculation is reflected in the form of a histogram. So its calculation is as follows:

• M = MMSu of 13 periods (PM) and 8 of displacement
• D = MMSu of 8 periods (PM) and 5 of displacement
• L = MMSu of 5 periods (PM) and 3 of displacement

To take into account the following considerations:

• M = Jaw
• D = Teeth
• L = Lips
• MMSu = Smoothed Moving Average
• PM = The moving averages are calculated on the midpoints of the Japanese candles. [(Maximum + Minimum) / 2]
• Shift = It is the number of period that the moving average moves forward.

Now, having this calculation done and knowing each of the parts that compose it, the Gator oscillator is drawn. That is, drawing the Gator oscillator means building the histogram:

Top bar (above zero) = | Jaw (M) - Teeth (D) |

Bottom bar (below zero) = | Teeth (D) - Lips (L) |

The vertical bars between which the calculation is located indicate that the value of the subtraction is in absolute value. It only remains to know why some bars are red and others green.

• Red bar = If the value of the bar is lower than the value of the previous bar.
• Green bar = If the value of the current bar is higher than the value of the previous bar.

The importance of understanding what depends on whether a bar is green or red is that its use depends on the colors. That is, depending on the colors that the bars take, the indicator will be signaling movement in one direction or another.

## Trading with the Gator Oscillator

Once we know what it is for and how it is calculated, we will see how to put the knowledge into practice. This indicator, however, is designed to complement the Alligator indicator and is part of the Bill Williams trading system. This is why its use in isolation is not recommended. Knowing this, let's see what trading signals this indicator offers. For this we are going to divide your study into 4 phases:

1. #### Awakening of the Gator:

The upper and lower bars show different colors. Which indicates that the stock market trend is not clear. This is not a good time to enter long or short positions but the trader should pay attention. The gator is waking up.

2. #### The Gator goes hunting:

The upper and lower bars are green. That is, the stock trend is clearly bullish or bearish and it is a good time to add long positions (uptrend) or short (downtrend). The gator is hunting.

3. #### The Gator makes you fat:

After the hunting phase, one of the bars (upper or lower) changes color to red. At this point the trend loses strength and you have to watch out for the trend reversal signal. The gator has eaten the game and is satisfied.

4. #### Gator's Rest:

After the phase in which the Gator gets fat, both the upper and lower bars are red. You have to close open positions and take profits, the trend is ending. The Gator has already eaten and is going to sleep.

Let's see the above with an example:

In this example we have included the Alligator indicator to make it clearer. The moving averages are above the price which indicates that the trend is bearish. And therefore the position we must adopt is a short position.

In phase 1 (awakening) the colors of the bars do not match and we must be vigilant. In phase 2 the Gator goes hunting (both bars are green) so we enter a short position. After the first hunting phase, the Gator is satisfied (phase 3) but still does not go to sleep. He goes out hunting again and we can introduce new short positions. After another phase in which he is satisfied, the Gator decides to go to sleep (phase 4) since both bars are red. It is time to close short positions and take profits.

In conclusion, being a trend indicator, it is advisable to use it in trend assets. For example, the stock market. Likewise, it is also advisable to use it together with other indicators such as the Alligator and use it as a confirmation. In other words, use it as part of a trading system.

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