Diving into trading, I could either double my funds overnight or see them disappear in an instant if I push my limits too far. Savvy traders like me don’t go all-in; we scale back our leverage and manage the risk. Now, let’s discuss the “hunting” strategy—it's a straightforward setup with just a price chart and one indicator.
What tools do I need for the “hunting”?
Here's the deal: all I need is a price chart and the Alligator indicator. Just like real alligators that stalk their prey, this tool is a technical analysis asset that utilizes smoothed moving averages. It starts with a simple moving average (SMA) and employs three moving averages set at five, eight, and 13 periods—the Jaw, Teeth, and Lips of our Alligator. The indicator generates trading signals through convergence-divergence relationships, where the Jaw moves slowly and the Lips are quicker. The golden rule? I “hunt” when the Alligator is on the move. Now, the big question: when should I call it or not? Let’s look at the screenshot below.
So here’s the thing: I might think every position is good for a PUT option because the indicator is dropping and those lines aren’t crossing. But that's a rookie blunder and a one-way ticket to a loss when the price starts moving against me.
When to grab an option with the “hunting” strategy? Whether you're a seasoned trader or new to the market, exploring opportunities offered by the broker PocketOption for strategic trades can enhance your trading approach.
To determine when to buy, I need some extra indicators, or as I like to call them, “assistants”:
- First up is the Relative Strength Index (RSI) on a 14-period setting, and I’ll remove all levels except the 50. The RSI tracks momentum—it shows how recent price movements can indicate if I’m in overbought or oversold territory.
- Next, there's the Stochastic Oscillator, a momentum tool that compares a specific closing price against a range of prices over a set period. I can adjust its sensitivity by changing the period or applying a moving average. It’s meant to provide overbought and oversold signals, using the 0-100 scale—all standard settings from the Pocket Option platform work just fine.
- This little buddy usually has two lines: one indicates the oscillator’s value each session, while the other shows its three-day simple moving average.
More tips on trading with the Hunting Strategy
The hunting strategy is my favorite for shorter timeframes, usually between 5 to 15 minutes. I always set a short expiration—about 2-3 candle formations. When the Alligator is active and all lines are moving up, that’s my signal to execute a CALL option. To confirm the trend, I check if the RSI is above 50, and the fast Stochastic (blue line) crosses the slow one upward, just like in the snapshot below.
A sell signal appears when the Alligator enters a downward phase. According to this hunting strategy, I can act on a PUT option when the Alligator is going down and those lines are angled downward. To support that trend, I ensure the RSI is below 50, and the fast Stochastic crosses the slow line from the top down, as shown in the screenshot below.
Conclusion
This hunting strategy relies on three solid tools: Alligator, RSI, and Stochastic. Divergences between the Stochastic oscillator and price movement are key signals for reversals. For example, when a bearish trend hits a new low but the oscillator shows a higher low, that could indicate the bears are losing power, setting the stage for a bullish reversal. The RSI and Stochastic oscillators are widely used in technical analysis, and even though they often work together, they have their own distinct mechanics. The Stochastic assumes closing prices should follow the current trend, while the RSI measures the speed of those price changes, excelling in stable trading patterns.
Before acting on signals, I make sure to equip my chart with all three indicators. I might stick with defaults at first, but tweaking them to find my perfect setup can also yield good results.
This hunting strategy is essentially a simplified version of the Alligator strategy by Bill Williams, which is quite complex. For better signals, I often pair this with classic technical analysis like support and resistance levels and price patterns.
