It doesn’t need to create a separate window for itself and appears as an extra indicator or your main chart. Also, the indicator comes custom-built into TradingView, MT4, and MT5, three of the most popular trading platforms. The alligator indicator can be used in any market or time frame.
Indicator’s Numbers
Let me explain how to trade with Bill Williams’ Alligator indicator. The Alligator indicator was invented to determine the state of the market. During the Sleeping phase, the Alligator’s three lines (Jaw, Teeth, and Lips) are tightly intertwined and move horizontally in close proximity to each other. You can change this to simple, linear weighted, and exponential. The Take Profit is set at the distance twice as much ndax review that of the stop loss.
Momentum Indicator for Trading Strategy 2024-2025: Full Guide with Charts and Examples
The chart below shows the Williams Alligator applied in a Microsoft chart. Technical indicators are essential tools that help traders predict the future price of financial assets. These indicators are created using complex statistical formulas. The indicator will flash false positives when the three lines repeatedly crisscross each other due to choppy market conditions. According to Williams, the alligator is “sleeping.” You’re to remain on the sidelines until it wakes up. This exposes a significant drawback of the indicator because many awakening signals within large ranges will fail, triggering whipsaws.
It is clear from the chart, the (XAUUSD) has been trading in a downtrend up to now. All the attempts to drive the price up have been absorbed. When the price was above the Alligator lines, the lines themselves didn’t change their direction. To begin with, let’s consider the classic use of the Alligator without using other analysis trading tools. That is, the momentum indicator is used in its original form. In a trading range, the Alligator’s “mouth” is closed.
Williams Alligator Indicator – Trading Strategy and Tips
Williams said that individuals and institutions tend to collect most of their profits during strongly trending periods. Forex technical analysis indicators are regularly used by traders to predict price movements in the Foreign Exchange market and thus increase the likelihood of making money in the Forex market. Forex indicators actually take into account the price and volume of a particular trading instrument for further market forecasting.
- A lot of crypto trading strategies use this indicator.
- In the first stage, the predator watches the prey as if it is sleeping.
- It generates the entry points at the momentum inception and signals the trend exhaustion.
- The lip line should break through the teeth line upside, and the teeth line should cross the jaw line from bottom to top.
- Also, use several tools like the Fibonacci Retracement and Andrews Pitchfork.
You can also trade with the default parameters, but, in this case, you should trade in longer timeframes from H4 to D1. MEDIAN PRICE — median price;HIGH — the highest price of the bar;LOW — the lowest price of the bar;SMMA (A, B, C) — Smoothed Moving Average. A parameter is for data to be smoothed, B is the smoothing period, C is shift to future. If you want to adjust Alligator settings to different timeframes, you should perfectly understand this indicator’s work principles. It should be borne in mind that the shorter the working timeframe, the greater values should be set for the indicator formula.
Similarly, a sell signal is given when the lip crosses the jaw and the teeth to the downside. When the alligator’s lip, teeth, and jaw are close, Bill Williams says the alligator is ‘sleeping’. But when the lines are far apart, the alligator plus500 review is said to be awake and, therefore, it provides trading signals. The indicator applies convergence-divergence relationships to build trading signals, with the jaw making the slowest turns and the lips making the fastest turns. The lips crossing down through the other lines signals a short sale opportunity, while crossing upward signals a buying prospect. Williams refers to the downward cross as the alligator “sleeping” and the upward cross as the alligator “awakening.”
When you trade on a one-hour chart, the period ranges from one to four days. When you work in shorter timeframes, a trading signal works out during one or two trade sessions. The Alligator technical indicator allows a trader to define the ongoing market trend. It generates the entry points at the momentum inception and signals the trend exhaustion.
The indicator uses three smoothed moving average lines to determine market trends to provide long and short trading signals. You should not trade with the Alligator when the market is trading flat in a wide trading range. You trade in short timeframes, use the technical indicator with care, applying additional filters (fractals or Awesome Oscillator), and selecting parameters for each line. 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. To adapt the technical analysis indicator to different timeframes and markets, you should adjust the parameters (certain price periods and shifts) of the moving averages.
However, with this approach, there will be a lot of signals in short timeframes, half of which will be false. In long timeframes, on the contrary, there will be fewer signals, and you will have to wait for entry signals for a long time. It turns out that when trading with the Alligator, you take almost the entire trend movement. When you trade with most other indicators, you enter the market at the trend’s end and could face the risks of the trend reversal and closing a position by stop. Other more complex instruments, included in the Profitunity system serve to filter signals and to detail the entry and exit points in the overbought and oversold markets.
What is the Alligator Indicator?
With the beginning of the trend, it begins to “open up” and “eat.” Let’s take a look at what signals the Alligator generates. In a downtrend, the lines are arranged in the opposite order. The jaw line is at the top, below is the teeth line, and the lip line is the lowest.
The next step is to look at the numbers that are in the indicator. The default periods for the jaw, teeth, and lips periods are 13, 8, and 5. The other important numbers to look at are the shifts. Other types of moving averages are simple, exponential, and weighted.
This is an improved version of the trend following Williams Alligator, through the use of five Trend Regularity Adaptive Moving Averages (TRAMA) instead of three smoothed averages (SMMA). This indicator can double as a TRAMA Ribbon indicator by reducing the offset to zero. Whereas the active offset can double as a forecasting indicator for options and futures. MFI and Awesome Oscillator According to the Market Facilitation Index Oscillator, the Squat bar is colored blue, all… Alligator is a momentum-based indicator, the main ability of this indicator is to determine market trend and its direction.
When the market “saturates,” it calms down, and then the same begins, and so on in a circle. The Alligator indicator was created by Bill Williams, an American trader, and psychologist. Williams described the Alligator indicator in his book ‘Trading Chaos’ in 1995.
