Alligator is an amazing forex indicator, especially when it comes to finding stable trending conditions. While alligators line remain untangled and straight, trending conditions can be considered confirmed. RSI indicator with high frequency (low calculation period) is used to find as many trading opportunities as possible within the trend. Stop loss remains tight and profit target is relatively conservative, however strategy allows to take profit even 10 times as big as average loss.
Used forex indicators
Alligator – default settings
RSI (relative strength index) period 2
SMA (smoothed moving average) 200
Timeframe: anywhere between 15 min to 1 hour
Forex strategy rules
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SELL
Alligator trending below SMA 200.
Alligator lines are clearly separated and lined from top to bottom : blue, red, green
RSI rises above 70 line. We wait for first bearish candle to close. On candle close we enter the positions short, placing stop loss above the price high reached while RSI moved above 70 line.
Take profit: we wait for first closed bullish candle in profit.
BUY
Alligator trending above 200 SMA.
Alligator lines are clearly separated and lined from top to bottom : green, red, blue
RSI falls below 30 line. We wait for first bullish Candle to close. On candle close we enter the positions long, placing stop loss below the price low reached while RSI moved below 30 line.
Take profit: we wait for first closed bearish candle in profit.
