Technical indicators in technical analysis - Essay Example

TECHNICAL INDICATORS "Most of the time the market remains stationary. Only for some 15-30% of time the market generates trends, and traders whoare not located in the exchange itself derive most of their profits from the trends" (Bill Williams, 2006). Alligator is a technical indicator that indicates changing trends in the market. Alligator works as a blind chicken that always find its corns. "Alligator Technical Indicator is a combination of Balance Lines or Moving Averages that use fractal geometry and non-linear dynamics" (Bill Williams, 2006).

The blue line (Alligator's Jaw) is a 13-period Smoothed Moving AverageThe red line (Alligator's Teeth) is 8-period Smoothed Moving AverageThe green line (Alligator's Lips) is 5-period Smoothed Moving AverageThese lines that form Alligators Jaw, Teeth and Lips show an interaction of different time periods on the chart. When these three lines join together it means the Alligator is going to sleep or already asleep. As it sleeps it gets hungrier, the longer the sleep the more hungrily it becomes.

When it wakes there will be a bullish run and after having a quite full of meal it loses its interest to food/price. "This is the time to fix profit" (Bill Williams, 2006). There are four types of moving averages:Simple Moving Average (SMA)Exponential Moving Average (EMA)Smoothed Moving Average (SMMA)Linear Weighted Moving Average (LWMA)ReferencesBill Williams. Alligator. Retrieved 29 Nov. 2006, http://www.metaquotes.net/techanalysis/indicators/alligator. 2006.Bill Williams. Moving Average.

Retrieved 29 Nov. 2006, . 2006.