The Mighty Alligator

Hello, dear readers. In this issue of the magazine we will consider a simple system based on the well-known Alligator indicator Bill Williams.

The rules of the system are as follows:

1.    Purchase order put at the opening if the previous bar closed above all three Alligator lines. Exit the position - closing the bar below the Alligator's teeth line (red line).
2.    Warrant of sale bet on opening, if the previous bar closed below all Alligator lines. Exit the market - the bar closed above the "Alligator" teeth line.
3. StopLoss is fixed and is set in the Expert Advisor settings.
4.    Profit - can optionally be clipped by TrailingStop.

Strategy testing

The rules of the strategy are not complicated, most often they are used by those who have just started to study the work with Alligator. Let's see how justified it is by conducting some tests on history. Let's choose EURUSD, GBPUSD, NZDUSD and Timeframe - H1.
The result for EURUSD for two years (see Fig. 2): timeframe H1, TrailingStop=21; TrailingStop=5; StopLoss=55.

Poor result, I never got to the plus side. Let's try to test on the same pair, but without using the TrailingStop (see Fig. 3).

A little better, but still the results are not impressive. Let's see if other tools will show us more impressive results (see Fig. 4 - 6).

None of the considered pairs showed us anything successful. The strategy is clearly unworkable, considering that the presented tools differ in the technicality of working out market signals. In the initial version, we should not expect anything good from the Expert Advisor, although it is to be expected. Perhaps optimization will help us.

Advisor optimization

The most stable (if it can be said so at all) of these results was the result of the euro/dollar pair. We will use it to optimize the Expert Advisor for a year and a half and after that we will conduct a forward test for the last six months (see Fig. 7, 8).

Among all the results, the variant with profitability of 1.05 and drawdown of 11.37% became the most acceptable. Let's look at the balance graph of these settings.

It seems that even the best performance of the Expert Advisor does not have a positive effect. The strategy remains unworkable. The profit gained is "eaten" by the loss of the forward test, and 16% profit is not worth such efforts.

Drawing conclusions

What can be said about this system? Very small ratio of profitable trades to losing trades (about 25-30%). Perhaps, this point can be corrected for the better with the help of additions to open trades. A flat/trend filter would not hurt either. Otherwise, the entries are accurate, with a small value of StopLoss (in one of the EA variants, the StopLoss was set at the minimum of the bar, and the result was approximately the same as in the above tests). Perhaps, when the idea is finalized, the system will be able to show a stable result, but at the moment, there are no recommendations for its use.

Files for downloading:

– FXG_eAlligatorZone.mq4 - "Mighty Alligator" expert;
– test.zip - Mighty Alligator's test results.

Download Indicators:

–  MTF_Alligator+T3 - Alligator for multitime frame