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Short-term strategy on the Alligator and oscillators

The Alligator is a classic trend indicator which is included in the top 5 most popular tools for market analysis. It works well with the Awesome Oscillator, since its developer Bill Williams created it specifically for use with the Alligator and Fractals. In our case, the strategy is complemented by the most popular oscillator – the Relative Strength Index (RSI). The system is suitable for Olymp Trade and allows you to trade 1-minute fixed contracts.

Strategy features

The uniqueness of the system lies not so much in the combination of tools used, but in the features of the Olymp Trade terminal. The platform is adapted for trading on the minimum intervals of the chart, starting from 5 seconds in candlestick mode. The minimum expiration is 60 seconds and the maximum for turbo contracts is 5 minutes. That is from 12 to 60 candles. This ratio allows for the use of long-term forex strategies on the minimum chart intervals.

The system under consideration falls into the category of medium-term systems. It is called short-term due to the fact that trading on it does not take up a lot of the trader’s time. In an hour, 10 to 20 passing signals are formed on average. Moreover, their accuracy is no worse than the figure that would be registered on the minute or hourly chart of a forex terminal.

Trading platform settings

The interface of the Olymp Trade terminal is simple, so there should be no difficulty in prepping it for trading according to the strategy. If you follow the instructions clearly, it is quite possible to do it in under 2 minutes.

Step-by-step instructions for prepping for trading:

  • Choose LTC BTC in the asset catalog;
  • Activate candlestick mode on the 1-minute time frame;
  • Set the amount of investment in the contract;
  • Add 3 indicators and customize them.

The investor’s capital management technique sets out the rules for the trader. According to them, the maximum value of a single trading contract should not exceed 5% of the account balance. This is the upper limit of acceptable risk. The optimal investment value is less than 1%, an amount of 0.1-0.5%. Therefore, the larger the amount of trading capital, the higher the actual (non-interest) profit from each trade will be under conditions of lowered financial risk.

Instrument settings:

  • RSI – period: 14, zone boundary settings: 50% for both areas;
  • Awesome Oscillator – it has no adjustable parameters except for the color of the histogram fill;
  • Alligator – the standard averaging period is used: 13, 5, and 3.

An important aspect is the choice of trading asset. The cryptocurrency index is suitable for this strategy; therefore, the system is only suitable for Olymp Trade. On other trading platforms, LTC BTC is not in the list of assets. Ordinary currency pairs are less suited for short-term trading on such small intervals of the chart as their volatility is lower.

Strategy signals

The main principle when trading on systems that use multiple indicators is the synchronization of signals. After the main element has been triggered, confirmations from the other tools should appear. The order of signal formation plays a minor role, the main thing is that there is no big discrepancy in time. The maximum time between the signals is 1 minute (6 candles in 5 seconds) for this strategy.

The signal for a decrease is a combination of 3 factors. The main indicator is the Alligator, on which an intersection of the red and green lines should occur. Confirmation from the oscillators is the transition of both of them to the oversold zone.

The signal for an increase is the intersection of the Alligator lines during the reversal of a pronounced downward trend. The confirmation is the transition of the RSI and Awesome Oscillator from oversold to overbought (upper half of the window).

When trading on the system, false signal filtering is of great importance. The combination of indicators used only solves this problem in part. Therefore, the trader must carefully assess the chart situation before opening a trade.

Approximately 70% of the time, the market is in a phase of low activity and it is “asleep.” Traders call this a flat or a horizontal trend. During this period, it is not advised to trade on most strategies for technical analysis. Recognizing a flat is easy to do on clean charts. The nature of price movement takes a horizontal direction with frequent wave-like oscillations that have minimal amplitude. A typical example of an unsuitable trading phase of the market is illustrated on the Olymp Trade terminal above.

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