Williams Alligator Indicator Trading Strategy and Tips

As the green line is first to react to changes, we expect it to make the first move, followed by the red line, and finally, the blue line which is the slowest line. maxitrade information about the broker – broker overview When the green line crosses above the two lines to the upside, it indicates a buy signal. While a cross below the two slower lines Indicates a sell signal.

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 (green line) crossed above the two slower lines (blue and red). The direction was confirmed as the lines diverged and we saw an uptrend that lasted from mid-May to early October. The lip of the alligator indicator (the green line) is the most active and dynamic of the three lines. However, it sometimes doesn’t cross the other lines fast enough to give signals.

  • This will signal that there should be an entry point to open a position following an uptrend.
  • You can use them to know the right time to enter a trade after you have identified a trade setup with the Alligator indicator.
  • The Bill Williams Alligator indicator offers more colorful imagery to trading than other indicators.
  • Now, it is time to look at how you can apply what you have learned in developing a suitable trading strategy.

Before you practice trading with the alligator indicator, there are a few points you should be aware of. One of the solutions to this problem is the Alligator indicator developed by Bill Williams, a prominent trader. Alligator Indicator is proved to be efficient even in modern conditions of high-frequency (HFT) trading. For an uptrend, the counter-trendline is placed across the highs of the pullback, so an upward breakout is a signal to go long.

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 is said to be awake and, therefore, it provides trading signals. So, this indicator is his attempt to show traders when the market is trending with many trading opportunities and when it is locked in a range. It is, therefore, the perfect indicator to trade ranges as well as utilize the range trading strategy. As a matter of fact, many of Bill Williams’ indicators also follow this idea. When the green line (the lips) crosses the red and blue lines, the alligator is likely waking up.

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This script expands on that and checks 10 different multipliers to see trend over the long term and have 10 values. Those 10 values each give a color to one of the 10 lines in turn giving this Fire like plotting. I personaly use this to see if there is fear (red) in the markets or greed… If you have an interest in financial trading, you must have knowledge of two concepts, moving averages and volume….

In summary, the Alligator indicator does help the trader stay in the position for a longer period. Williams also developed a “Gator” histogram indicator to help visually with its interpretation and provide another means of validation. In the chart above, the alligator provided a sell signal (1).

  • The alligator chart indicator is one of the commonly used technical analysis tools.
  • The Lips crossing down through the other lines signals a short sale opportunity while crossing upward signals a buying opportunity.
  • Other types of moving averages are simple, exponential, and weighted.
  • Further, this lag functions as a filter and helps eliminate insignificant and false signals.
  • When a moving average with a shorter period breaks above a moving average with a longer period, it’s a buy signal.

The fractal must be above or below the Alligator teeth, depending on the trade direction. It is often required to use additional filters for trading signals. Without filters, it could send many false signals and there is a high risk of causing many losses. You need to adjust settings for each trading style and timeframe individually.

How Does the Williams Alligator Indicator Work?

The alligator is a trend indicator that alerts traders about the formation of a new trend and its direction. The alligator consists of three lines which are smoothed zulutrade forex broker review simple moving averages (SMAs). Depending on where you think the pair’s price is heading, you may want to take a long (buy) or a short (sell) position.

Setting Stop Loss on the indicator lines

You want to see all lines pointed in the same direction, in order. When the 3 lines of the Alligator indicator are intertwined, the Alligator is sleeping. When an Alligator is sleeping, nothing interesting is going on.

The tool easily integrates with other indicators.It is easy to identify areas of divergences or reversals. Second, it is always important to use it in combination with other indicators like the RSI and MACD. Also, use several tools like the Fibonacci Retracement and Andrews Pitchfork. Alligator is a trend indicator and can be used well when an asset is rising or falling. In most cases, it rarely works when assets are in a consolidation phase. In the Eating phase, the Alligator’s lines are fully spread apart, with the Jaw, Teeth, and Lips in ascending order from bottom to top.

We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. For example, you can exit your buy positions when the lip of the alligator crosses the teeth and the jaw to the bottom side. Similarly, exit all sell positions when the lip of the alligator indicator crosses the teeth and the jaw to the upside. By the way, the periods of these smoothed simple moving averages were not chosen randomly; Those are numbers based on the Fibonacci sequence. In the Fibonacci sequence, the first two numbers are 0 and 1, and the following number is the sum of the two numbers immediately before it. There is no doubt all these things may seem a bit technical to follow.

$42 Per Strategy

The Alligator forex indicator is a respected tool in the forex trader’s toolbox. It is a standard offering in most every trading platform, including MetaTrader 4 (MT4) and others proprietary systems, as well. Meta, formerly Facebook, (META) has an alligator “awakening” signal near the bottom left of the chart, then embarks on a strong uptrend that shows an alligator “eating with open mouth” lexatrade review – pros, cons and verdict phase. 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.

Tips for traders and common mistakes you should avoid with the Alligator indicator

You enter a trade at the fractal breakout when the market trend has already acquired a direction. Next, the price breaks through the Alligator lines and updates the local minimum. The lip balance line crosses the teeth and jaw line, signaling the end of the uptrend. The Alligator indicator shows the forex market state at any given time and helps investors to boost their personal finance.

Alligator and Fractals Trading Strategy

In case of confirmation, for example, by the oscillator, the technique is effective on the time frames from M15 to D1 and allows taking up to 60% of the price movement of any trend. Alligator is successfully used in any trade systems as the trend tool (Trading Chaos). The Stochastic parameters can be changed for assets with high volatility.

Discover the range of markets and learn how they work – with IG Academy’s online course. The following steps illustrate how to set up the Alligator indicator in the MetaTrader 4 software. If you don’t like the product for whatever reason, we will return the whole amount you paid us. Share your personal experience of the effective usage of the indicator Alligator. In order to try the indicator performance alone or in the combination with other ones, you can use Forex Tester with the historical data that comes along with the program.