Alligator indicator: Alligator Indicator Technical Indicators Indicators and Signals

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.

You can detect the power of the alligator 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. You can learn the trend direction following the fastest moving average. If it crosses other lines from top to bottom, it’s a signal to sell.

The Gator Indicator(Scripting in Tradingview

You can use such alerts in both trend following and trend reversal strategies. Keep in mind that trading with margin may be subject to taxation. PrimeXBT shall not be responsible for withholding, collecting, reporting, paying, settling and/or remitting any taxes which may arise from Your participation in the trading with margin. PrimeXBT Trading Services LLC is incorporated in St. Vincent and the Grenadines as an operating subsidiary within the PrimeXBT group of companies. PrimeXBT Trading Services LLC is not required to hold any financial services license or authorization in St. Vincent and the Grenadines to offer its products and services. It can be any of ENUM_APPLIED_PRICE enumeration values.

You trade in short timeframes, use the technical indicator with care, applying additional filters , 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. The first type of trading with the Bill Williams’ Alligator indicator suggests you don’t use any additional trading tools. The second type of trading strategy employs additional filters to spot entry points. Employing auxiliary indicators reduces the number of false signals and gives an opportunity to enter the forex market with additional confirmation.

Determine your exit point after the “CCI” warns of an oversold condition and a candlestick closes above the Red middle line. It is wise to hold while the three lines are far apart. A doji is a trading session where a security’s open and close prices are virtually equal. It can be used by investors to identify price patterns. Investopedia requires writers to use primary sources to support their work.

Fake Cross

This is nothing but a new consolidation after a fast trend. At this time and according to his theory, in accordance with the general concept of technical analysis, a trader should close his positions and wait for a new trend to begin. It is generally accepted that markets are in this state for about 80% of the time. The remaining 20% of the time shows really pronounced trend movements, which are especially favourable for scoring profits. This technical indicator was created specifically to identify such movements and inform the trader about the emergence of trends.

Remember, these lines are displaced into the future and would have plotted in front of the candlestick we are shorting. At this point, you have learned how to setup and use the Williams Alligator to determine the state of the market and the trend direction. “Displaced” means that the reading is adjusted X bars into the future which is believed to better forecasts future trend direction. In principle, the Alligator technical indicator is a combination of Balance Lines that use fractal geometry and nonlinear dynamics.

Alligator trading strategy summed up

On the rise, the price drops to the Jawline, but the indicators do not cross each other. An alligator “sated” sell signal arrives when the Lips cross below the Teeth and Jawlines and lines intertwine as the price moves sideways. The three lines stretched apart and moving higher or lower denote trending periods in which long or short positions should be maintained and managed. You agree that LearnFX is not responsible for any losses or damages you may incur as a result of any action you may take regarding the information contained on this website.

The initial smoothed average is calculated with a simple moving average, adding additional smoothed averages that slow down indicator turns. When markets begin to trend, traders can look for pullbacks the Williams Alligator lines to take a position, setting a stop below the support level as a point of invalidation. In the following example, the red line or alligator teeth acts as support at two pullbacks. The third pullback trade was invalidated after the price failed to find support at the lips, teeth, or jaw once again, and broke below previous pullback support.

The Alligator gives higher number of successful signals, but these signals will often put us in positions, which catch less than half of the trend. In addition, the TEMA can be combined with an extra moving average in order to validate signals. When the distance between the lines begins to expand and we see a bullish candle closing above the Alligator teeth and jaws, we go long. The signal for a hungry Alligator is after the completion of the waking-up stage, a candle closes below or above the three lines.

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. As the downtrend develops, the distance between the balance lines is increasing.

The consolidation state of the forex market is characterized by the closed mouth of the Alligator. The balance lines of the lips, teeth, and the alligator’s jaws are interwoven. The jaw is the 13-period smoothed moving average that is shifted into the future by 8 bars. The lips line is the smoothed moving average with the default period of 5, moved by 4 bars into the future. Alligator’s Lips – 5-period smoothed moving average which is moved 3 bars into the future.

The Alligator Indicator by Bill Williams: Use Your Imagination

Although the Alligator indicator is one of the most reliable ones, it may also provide fake signals. If the green line crosses the red line opposite to the existing trend and then gets back, it’s a fake cross. One of the indicator’s drawbacks is the time lag, which is a common pitfall of all the indicators. You’ll likely see the fake cross much later than the price continues moving within the current trend. The Alligator indicator is one of the basic trend indicators.

• This indicator was created to exclude false signals if no trend.
• No matter your experience level, download our free trading guides and develop your skills.
• Another benefit of the Williams technical indicator is that it generates the entry points when the momentum is just emerging.

Alligator is a classical example of trade signals on a breakthrough or a turn from borders of range and power levels. Each of them is considered the line of balance (the «fair» price) for the time period provided that the price isn’t influenced by other strong factors, as a rule – fundamental. It allows executing the short-term and medium-term forecast of the price, but the quality of signals strongly depends on stability of the market. At both of those arrows, the Alligator Indicator is letting you know that the market is extremely bearish, and you should be hanging on to short positions. In fact, you can even make an argument for the compression between the two red arrows as not quite enough to get you out of the original position. The Bill Williams Alligator Indicator is a trend-following indicator.

Finally, even though it is a very effective indicator in identifying trends and providing buy and sell signals, it is also known to provide false signals as well. That is why it is advisable to always make use of the Alligator indicator in combination with another technical indicator like MACD to filter out false signals. The Alligator indicator is a technical indicator which based on three simple moving averages with different periods and forward offset. It was developed by Bill Williams, the author of “Trading chaos” and “New dimensions in stock trading” books. He devised a trading system to predict a Forex price action on the basis of several indicators including the Alligator technical indicator.

• Expect when the hourly candlestick breaks through the most recent downward fractal and closes below.
• At the end of the trading day, consistency is your primary objective, and, hopefully over time, Alligator Technical Analysis will help you gain an “edge”.
• Today we are going to discuss the Alligator trend indicator , which is quite capable of being the main element the trading strategy.
• As such, in this case, the Williams Alligator will help you identify exit areas.

Wait for the fastest line to cross the other lines upside down. Remember that other indicators may give a confirmation too. We’ll talk more about it in the “How to Combine the Alligator Indicator” section. Research & market reviews Get trading insights from our analytical reports and premium market reviews. FAQ Get answers to popular questions about the platform and trading conditions.

If the price is above this line, the market will not only move up but also positively evaluate new factors. Consequently, if the price is below the “jaw”, the market will go down and take the new factors negatively. The Alligator indicator got its name because of vague similarity to the crocodile. Its shape reminds an alligator with the closed or opened mouth.

In the above example, you would stay in the trade until a Candle closed above the middle Red line. Williams also developed a “Gator” histogram indicator to help visually with interpretation, and many other traders have added their own “twist” to enhance the reliability of this indicator. Number 1 indicates that the entry conditions to go short according to the Alligator strategy are met. If the price does not rise despite the buys, the chances of its decline increase. This is what eventually happens when sellers appear .

The https://forex-world.net/ line (Alligator’s Lips) is the Balance Line for a significant period, which is lower by another order (the 5-period smoothed Moving Average shifted by 3 bars to the future). Pay attention that crossing the Alligator’s lines is the first signal of the upcoming move in one direction or another. If all three lines are crossed, you can be sure that it is an additional signal after which the “jaw” is supposed to open. The combination of three Moving Averages is a complex construction, which may be not easy to “read”. To apply an ALLIGATOR indicator to a chart, a trader needs to follow the procedure common to all Marketscope indicators.