The “Classic Alligator” strategy

As you can understand from the name, we want to describe a classical approach to binary options trading with indicators. And this bright example is the Alligator indicator, which was developed by the talented trader Bill Williams. There are many methods of using the Alligator to predict asset markets, and it is included in many test strategies, but the classic indicator signals remain, to this day, the most accurate and bring the maximum amount of profit.

Trading on the Alligator

Up until a certain time, trading binary options with indicators was a nightmare for traders. There were no platforms that supported these technical means. Most market participants used all sorts of services and forex trading platforms, where they analyzed the market with indicators and then registered contracts on options platforms. Making a profit through such trading always brought with it a lot of problems and difficulties. But after the release of the Binomo broker’s platform on the market, everything changed dramatically. Now, trading on the alligator can be done directly on the asset chart, which is located on the options platform, and, as a result, we’ve moved away from the use of third-party services, and increased profitable trading statistics.

Now, the strategy of "Classic Alligator". We select our trading asset (preferably with the highest options yield) and, using the Binomo platform’s indicator set, we configure the Alligator on the asset chart (the settings do not need to be changed):

A little more on the indicator. It consists of three lines of different colors, which are moving averages with different building intervals. These moving average settings allow you to analyze the market in three time perspectives. Simply put, each line of the Alligator shows the direction of price movement on older trends, and the result is a high-precision signal for options trading.

Trading on the Alligator - signals.

We have already spoken about the fact that there are an incredible amount of ways to use the Alligator. But we are going to consider trading on the Alligator in the classic sense. Therefore, our trading signal will be the intersection of indicator lines in either direction - UP or DOWN.

The intersection of indicator lines UP is a signal for the registration of options contracts on an increase in the price of the underlying asset:

To trade binary options on a reduction in the price of the underlying asset, the Alligator gives a signal in the form of an intersection of lines DOWN:

Trading should only be done on clearly reflected signals; that is, if the lines confidently intersect each other in a certain direction. In the market there are periods when the Alligator lines begin to intertwine with each other and do not indicate a certain direction, or a high range of motion - the so-called period of a sleeping Alligator. Typically, this indicator behavior occurs when the market is dominated by a side flat in a narrow price corridor. When you see such a development on the trading chart, you should refrain from trading.

Expiration and risks

Indicator strategies based on such accurate indicators as the Alligator allow you to increase your trading risks a little, but the volume of contracts must not exceed 5% of the amount of trading capital you’re managing. For initial accounts, (the Binomo broker offers them for $10) risks should be minimal, so the company has set the minimum cost of a trading lot to $1. As a result, the effective management of trading capital can be achieved on smaller accounts. With regard to option expiration times, they must be set within the range of up to 5 minutes, because trading on the Alligator, in this case, occurs on a rapid tick chart of the underlying asset.