Alligator Indicator

FYI, these sounds are created with our Alert Sound Maker. Note that the indicator’s Style parameters can be specified individually for each line . Smoothing method – the parameter allows specifying the smoothing technique to be applied during the calculation of the ALLIGATOR values.

Either way, https://forexanalytics.info/ indicator will only show what’s happening now, it won’t get any forecasting value no matter what Shift settings are. When Alligator is full and happy, he closes his mouth and goes to sleep again – the 3 lines move closer together or intertwine again. Alligator indicator helps to determine the presence and absence of a trend as well as its direction. If this is applied with a tight stop loss, likely, you will often run into problems as these indicators are lagging.

If the price consolidates above the jaws blue lines and continues to move in a new direction, the Alligator lines will begin to rebuild and indicate new trading dimensions. The strategy suggests not every trade will reach the set Take Profit, and it is normal. If the market conditions change unexpectedly, traders exit trades manually.

However, Alligator is present in every Forex trading platform by default, so there is no need to calculate these values yourself. Next, the lip line is the first to react, as it is the fastest. Next, the teeth line reacts, and the jaw line is the last to react. It works in a similar way as an Alligator opens the mouth to capture the prey. When the mouth opens, it signals that you should enter a trade.

Trend formed and direction

You may combine the Alligator indicator with another momentum-based indicator like CCI to enhance your trading experience and to get better trading signals. The Alligator Indicator is based on the premise that financial markets and securities trend for only 15% to 30% of the time while and grind sideways the other 70% to 85% of the time. And William believed that most traders collect most of their profits during strong trends. Next, when the red and green lines begin to intersect in one direction towards the blue line , the Crocodile has awakened. The principle is still the same as the moving average crossing signal; if it crosses up it means the price will go up, or it will go down if it crossing down. Like all the moving averages, the alligator is a lagging indicator.

• Enjoy technical support from an operator 5 days a week, from 9 a.m.
• In this article, we will keep the author’s metaphoric terminology.
• Stay in the trade as long as the candlesticks ride above or below the Alligator.
• The course of the moving averages simply identifies the trend direction.
• Bill Williams’s inventions have made an outstanding contribution to modern trading.
• Having eaten enough, the Alligator goes back to sleep , so it’s time to take profit.

The Fractals indicator looks like an arrow above the Japanese candlestick up or below the candlestick down on the chart. You can download the Alligator momentum indicator for the MetaTrader on the MetaQuotes official website. The lines do not indicate a specific direction, they are located in the horizontal plane. I will divide the Alligator signals into three groups. Each of the groups describes a certain state of the market at the current moment. Let me explain how to trade with Bill Williams’ Alligator indicator.

Arrow trend indicators: trading strategies and advantages

Bill William created the analogy with the Alligator to describe the behaviour of the market according to the phases of the Alligator’s daily routine. For example, the time of the trend absence or sideways moves relates to the Alligator’s sleeping. Afterwards, the Alligator wakes up and looks for its prey. The trend strength depends on the length of the sideways trading as the Alligator’s hunger depends on when it was sleeping. Similarly, a bearish trend will remain if it is on the right side of the chart. As such, you should start exiting when the price moves towards the lips of the indicator.

You can detect the power of the indicator not only by the spread between the moving averages but the price interaction. If the price goes beyond the green line for short periods, it’s a signal that the trend will soon end. The more times the price breaks the green line, the weaker the trend. Nevertheless, it’s more important for a trader to determine the direction in the initial stages.

How to interpret the Alligator signals

It is a standard offering in most every https://day-trading.info/ platform, including MetaTrader 4 and others proprietary systems, as well. The Alligator is as much a metaphor as it is an indicator. The Alligator indicator helps differentiate between trending and resting periods. The indicator consists of three lines, overlaid on a price chart, that represent the jaw, the teeth and the lips of the alligator. It indicates that a trend is in effect and in what direction the trend is moving. If you think the alligator indicator is signalling an uptrend, you can open a ‘buy’ position .

The pioneer Bill William developed the Alligator indicator which is an indicator of trend following. He believes that individual securities are only 15% to 30% the market is in a sideways condition and 70% to 85% of the time presents a good opportunity. This indicator was first introduced by Bill William, a famous technical expert, and trader who developed chaos theory effects and special effects in the market. Here is the stop-loss at the red line, or the alligator’s teeth. When the alligator is sleeping, it’s best to stay out of the market. When it wakes up is when you should tackle the market with it.

As the alligator is based on moving averages and a moving average is a lagging indicator, the alligator’s signals may appear with a delay. The Bill Williams Gator Oscillator is a useful indicator, but it’s essentially the same thing as the Alligator Indicator. In other words, it’s basically just using three moving averages in order to determine trends.

However, it has the fastest reaction to the price changes. This moving average is the first to react to changes in the balance of power of buyers and sellers in the market. This line is used to add up to the opened positions in the trend if there is strong momentum in the chart. Bill Williams refers to these moving averages as “balance lines”. You can see that he also gave creative names to the indicator and its elements.

Alligator Teeth smoothing periods – the parameter allows specifying the number of periods, over which the medium-period moving average indicator is to be calculated. Alligator Jaw shifting periods – the parameter allows specifying the number of periods, over which the longer-period moving average indicator is to be shifted into the future. Alligator Jaw smoothing periods – the parameter allows specifying the number of periods, over which the longer-period moving average indicator is to be calculated. The smaller the number is, the more sensitive to the market changes the ALLIGATOR indicator is, and vice versa. The Alligator is used to confirm ongoing trends and their primary direction. In addition to identifying existing trends, seasoned traders also use the alligator indicator to enter counter-trend moves.

The lines then cross, and two small downtrends develop. This is followed by a buy signal to the upside, which results in a brief uptrend. As the price pulls back, the Alligator is sated, and then it opens again for a big uptrend. This is followed by an extended sideways period, in which the indicator lines crisscross back and forth. This is a sleeping phase, and most traders are best to stay away. At the far right of the chart, the Alligator is opening its mouth again, or awakening, signaling a downtrend.

To define the price target I tend to look at some of the more classic technical analysis. Essentially, we are looking at important resistance and support levels or we wait for a trend reversal or the start of a correction. This means a reversal price pattern or a divergence with price at oscillators. The direction and target of the signals are derived from the lag by the longest of three time frames in this trading system.

Commodity Channel Index (CCI) Indicator

Like all the moving averages, the alligator is a lagging indicator, too. Such a lag in getting a trade signal leads to a partial loss of profit. But this lag functions as a filter and helps eliminate insignificant and false signals.

The Alligator’s Teeth, the “Red” line, is an 8-period Smoothed Moving Average, moved by 5 bars into the future. The Alligator’s Jaw, the “Blue” line in the diagram below, is a 13-period Smoothed Moving Average, moved into the future by 8 bars. If the three lines are flat and entwined, then the Alligator’s mouth is closed and he is said to be sleeping. In simple, these shifts are the periods are moved into. Smoothed Moving Average – Same calculation is an exponential moving average except the smoothing constant is different.

Once the lines have shown a direction, you can resort to using a price pattern that is a staple of all traders – pullbacks. There are several trading strategies you can use and keep in mind that all indicator based strategies do lag the market. Try a powerful cluster chart analysis tool for stock, futures and crypto markets. When the Alligator “opens its jaws” and eats until it is full, traders should trade according to the trend. When the jaw, the teeth and the lips are closed , the Alligator is tired or it is sleeping. As you can see, the numbers 3, 5, 8, 13 appear in the settings.

The https://forexhistory.info/ line is at the top, below is the teeth line, and the lip line is the lowest. As the downtrend develops, the distance between the balance lines is increasing. Now you need to spot a moment for the price to start to trade above or below all three lines of the indicator. The hunt begins from the moment when the Alligator’s lips open, the market starts to wake up.