Gator Oscillator is one of the indicators of technical analysis developed by Bill Williams - a famous Forex trader. Gator oscillator was based on transformed Alligator indicator.
Description and building of Gator Oscillator
Gator Indicator is represented by two bar charts situated one above another and below zero point. Upper bar charts shows the difference between jaw and teeth of Alligator (moving averages with periods of 13 and 8 respectively), bottom bar chart shows the distance between Alligator's teeth and lips ( moving averages with periods of 8 and 5).
Bar charts can be red or deep blue depending on value of previous column (watch MACD indicator): red column is above the previous one, green is located below (watch pic. 1).
Picture 1. Gator Oscillator (from below)
Gator Oscillator Formula:
Abs – module;
SMMA – Smoothed Moving Average;
Median Price – average price
N – period.
For convenience, it is accepted to multiply value of bar chart into (-1) so that it will be rendered below zero and won't overlap bar chart 1.
Essentially, Gator Oscillator by its form is similar to MACD indicator but without using signal line and is based on the difference between moving averages with different periods with shifting. Upon that, originally it was impossible to set shift parameter on your own that made the indicator less exceptional. However, at present traders not only can set periods and shifts, but price as well: Close or Open, High or Low etc.
Application of Gator Oscillator
In technical analysis this indicator is mainly used as a supplementary tool for confirmation signals. Lines of bar chart very clear show divergence or convergence of Alligator lines, and, as the result, show trend or absence of it. Author Bill Willams says that the indicator helps to define time of waking and dream of Alligator. Therefore, it Gator columns are close to zero, it means that Alligator sleeps and there is no trend on market (watch pic. 2) The father bar charts are from zero, the stronger trend is. Visual representation of the indicator is crucial for prompt market analysis, therefore, it is widely used by traders for forecasting trend.
Picture 2. Gator Oscillator under trend and when there is no trend