Using the Alligator indicator as a filter to eliminate unnecessary and false signals

As I have mentioned in previous posts, no technical analysis tool is perfect, so, to increase our chances of success the ideal is to use more than one indicator in our trading strategies, hence, in fact I consider it necessary to add other indicators for the indicator to work better as a filter and help eliminate unnecessary and false signals.

Now, in my opinion, one way to improve the accuracy of the Alligator indicator is by combining it with the indicator that serves to identify and confirm the "true" breaks, therefore, the Alligator indicator can be combined with the Rate of Change Indicator or ROC for its acronym in English.

As an example note in the following chart that in the price action of the TRX/USDT pair a resistance breakout occurs, note how after a resting phase the green Alligator Indicator line rises above the other two lines (wake-up phase) action revealing a clear buy signal.

This behavior can be confirmed with the help of the ROC indicator, as before the price action starts to rise and makes a sudden breakout notice how the ROC indicator anticipates and starts to move above the zero (o) line in a bullish direction, which confirms the direction of the trend and increases our probability of success when deciding to execute a market entry.

SOURCES CONSULTED

ForexTraders The alligator strategy – how to use the Alligator in forex trading. Link

OBSERVATION:

The cover image was designed by the author: @lupafilotaxia, incorporating image: TradingView