Alligator Indicator: How To Use and Read the Williams Alligator Indicator? Example and Definition


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Different Alligator indicator settings apply to trading in different timeframes. I should note that the longer is the timeframe, the more reliable are the signals generated. And vice versa, the shorter is the timeframe, the more there will be signals, but a false buy or sell signal will be more often to occure. You can choose the colors and the thickness of the lines as you want. The most important is that it is comfortable for you to analyze the chart, and the technical analysis indicator doesn’t prevent you from seeing bars.

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Do not use Alligator if you don’t trust technical indicators in general or you consider them as too complex instruments for trading, since there is a high risk of losing money rapidly. The Alligator strategy is a simple technical analysis tool and an efficient indicator, suitable for a beginner trader. It indicates the market state, defines the support and resistance levels to enter a trade.

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If it looks like the trend is set to continue, and a bearish engulfing candlestick occurs, this could be a signal to sell. Remember to set a stop a few pips above the high of the engulfing candle. How to filter off market noise with the Laguerre polynomials. Description of Laguerre RSI parameters and forex trading strategies with Laguerre RSI indicator. The candlestick, on which the Signal Fractal was formed, should not touch the Alligator indicator lines.

We can therefore say that a crossover of the green line to the upside indicates a buy signal while a crossover to the downside indicates a sell signal. The Alligator indicator can also help traders designate impulse and corrective wave formations, but the tool works best when combined with a momentum indicator. In the example to follow, the Commodity Channel Index is used for this purpose. The Relative Strength Index and the Moving Average Convergence Divergence are also two popular momentum indicators, designed to measure the strength or weakness of current pricing behaviour. When you trade during trending markets, the volatility range will be the distance between the green and blue lines, the angle of inclination can be used to assess the strength of the trend. When there’s no pronounced trend, the market is range bound – this is when you can apply this strategy to make early entries.

Another drawback to using the alligator indicator is that it is not always accurate. This means that traders may miss out on some good trades if they are relying too heavily on the alligator indicator. The main benefit of using the alligator indicator is that it can help traders stay in trades longer and avoid getting caught in false breakouts. The alligator indicator can also be used to confirm trends and help traders find better entry and exit points.

What Are The Limitations of Using the Alligator Indicator?

The Alligator Forex trading indicator is composed of three moving averages, which are called the three balance lines and are the jaws, teeth, and Alligator’s lips. Each of them has a different color and is responsible for a particular stage due to the development of forex markets. You will notice that the alligator indicator is nothing but a combination of three different smoothed moving averages each having its own shift into the future periods.

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An alligator technical indicator is one of the tools traders implement in trend trading. An alligator isn’t only a name; the indicator consists of teeth, lips, and a jaw. Although it may sound unserious, it provides reliable signals. This FXOpen guide will tell you how to read the alligator’s signals and use them to catch the perfect entry and exit points. The alligator indicator comprises of three lines which are all based on moving averages.

How does the alligator indicator work?

So, when the three moving averages in the indicator are intertwined, the market is said to be sleeping. Of course, the longer the beast sleeps, the hungrier it will be when it wakes up. The 5-period moving average represents the lips; the 8-period moving average represents the teeth; while the 13-period moving average represents the jaws. Bill Williams used the different parts of an alligator’s mouth to describe the three moving averages. The Kairi Relative Index is a technical analysis indicator used to indicate potential buy and sell points based on overbought or oversold conditions.

Just goes to show that https://forex-world.net/rs have different trade criteria and expectations… The direction is indicated by the movement of the balance lines. As the green line is our fastest moving average, we expect this to move first, followed by the red line and then, finally, the blue line. The green line crossing above the slower lines represents a buy signal.

Williams Alligator Indicator: The Complete Guide

When you see the lines going in a certain direction, you can introduce a price pattern that’s commonly used by many traders – a pullback. To support your theory, you should have all lines pointed in a single direction. You can define the length of pullback by selecting where the price should pull back to. It allows traders to identify the situation on the market, especially reversals and divergences. The indicator is always activated during the period of trend change. When the trend ends, the lines begin to intersect again and go horizontally (the alligator is “sated”).

  • This example is the alligator that alternates between the periods of sleep and hunting.
  • When the Green line flattens or crosses again, it is time to exit.
  • When the Alligator is sleeping, the market is range bound and a range trading strategy may be used which can give you a jump into the market early.

The Jawline corresponds to the 5-period, the teeth line for the 8-period, and the Lips for the 13-period. While it helps in terms of being memorable, the trading rules are a little on the vague side. It is recommended to rigorously test the indicator before use, in order to determine whether it actually yields positive results for you.

Following the green line, the balance lines of the teeth and jaws, the red and blue ones, begin to acquire directions. When three MAs line up in the same direction, the trader decides whether to enter the market or not. When the next candlestick closes above or below all moving averages, it is a signal to enter a buy or sell trade. Thus, to confirm the trend and start trading you always need to check the next closing prices to take a glimpse of the future performance of the asset. The alligator indicator is a technical analysis tool that is used to identify trends in the market.

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Williams Alligator is a complex, but extremely helpful and profitable technical analysis indicator, designed by one of the most legendary forex traders to ever live. The indicator can be used across forex, commodities, stock indices, and cryptocurrencies – among the many financial assets offered on PrimeXBT. Traders can get caught up in market chop using the Williams Alligator. He is considered one of the pioneers of trading psychology, and his views on chaos theory are popular in the financial industry.

# We also check if this bar is above the three alligator lines to avoid false positives. # We also check if this bar is below the three alligator lines to avoid false positives. Request the Ultimate Double Top/Bottom Indicator which is used by 10,000+ traders.

The best time to get on board a trend move is just before it happens. You must keep in mind that since we are using displaced moving averages, each of the 3 lines will be plotted ahead of price by the factor of the displacement – 3, 5, and 8 periods. Once the first 2 lines start to pull away from the blue line, the blue line trends in the same direction – the Alligator has opened it’s jaws and is looking to feast. The trader is looking to feast on the price action that is happening.

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The orange ellipse showed that the market is moving sideways. The Alligator, during this period, is said to be sleeping , before that it had fed pretty much . Now that we know that the Alligator is sleeping, we wait for the formation of a new trend. This was confirmed when the Alligator’s Lips crossed above the two slower lines .

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The core of the technical analysis is to identify the trend… Click the ‘Open account’button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading.

I should note that some Alligator indicatorrs use additional filters to supplement the Alligator, as it sends quite a lot of false signals in the sideways trend before the market determines the direction. The line is the average strength support/resistance level. It serves to enter trades when the trend is not that strong. If the instrument is within the daily ATR , the Teeth line can be an excellent marker for entering trades in the trend. @Gabrielx77 The Alligator indicator is popular with novices for several reasons… However, the indicator does have some deficits as well…


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