Keep in mind that a market that is transitioning from a consolidation to a trend, can give false signals. You can see in this graphic the 3 lines mixed together. When this occurs, section of the previous high and low and using your entry tactics, trade inside the range. At the same time, the spacing of the Alligator lines is supporting your short trade. Once the lines have shown a direction, you can resort to using a price pattern that is a staple of all traders — pullbacks. You want to see all lines pointed in the same direction, in order.

This example shows a strong uptrend is underway. You can determine the length of pullback needed by choosing where price has to pull back to. Here you can see obvious pullbacks that have pulled to the green and red line while the blue kept the upwards slope.

The horizontal line is not a perfect pullback but the tail on the lower green candlestick is a price action reversal near the first pullback low. On the far right, you can see this pullback failed however there was not break above the yellow line before price began to close under the 3 lines. The simplest trading strategy and trade signal for the Alligator is to trade the close of a candlestick after it crosses the lines.

I would suggest that traders look at support and resistance to ensure the buy and sell signal is not right into a previous cluster of price. Note the the green line has crossed over the red to the downside. Remember, these lines are displaced into the future and would have plotted in front of the candlestick we are shorting.

As for a stop loss when using the Alligator, consider using a multiple of the average true range or use previous swing high and lows. The most important part of the Bill Williams Alligator is when the 3 lines are mixed together. This is when the Alligator is considered to be sleeping and no trading signals are present. You should keep these instruments on your radar especially if price action is hinting at an increase in momentum.

The best time to get on board a trend move is just before it happens. While you may not be able to pick the exact price the trend begins, getting in as close to the beginning as possible should be your goal.

When the Alligator is feeding, watch for pullbacks against the main trend direction and trade those moves with a pullback strategy. As with any trading strategy, it is vital that you test it, lay out a trading plan, and ensure risk management is priority one. Trading the financial markets is not as easy as many make it out to be. Hope you have learned how to use the Alligator indicator as a possible technical indicator to aid in your trading.

Here are a few other tutorials that you may find of interest:. Trading With The 50 Period Moving Average. Hey John. I personally trade daily charts. Any timeframe you choose, make sure to test it. With moving averages on lower time frames, you can get a ton of whip back and forth. Thanks for explaining Alligator indicator in detail!

i have with bb bands, and moving averages. so thanks. This site uses Akismet to reduce spam. Learn how your comment data is processed. Learn To Use Alligator Indicator In Your Trading. February 9, Posted by: CoachShane Categories: Trading Article, Trading Indicators 6 Comments. Markets trend and market range and the 3 lines of the Alligator indicator, known as the jaws teeth and lips, is designed to alert traders to the presence of either of those market states From those states, a trader can determine if they will use a range trading strategy , a trend trading strategy, or wait for a breakout strategy to be used.

What Is The Williams Alligator Indicator? If using a trading platform such as Tradingview, you will have access to the complete indicator. How Does The Alligator Indicator Work? Since the market evolves from trend to range as Williams has stated, we can think of the market much like an Alligator and how it lives in the wild: When the market is ranging, the Alligator is sleeping When the market shows signs of a trend, the Alligator wakes up There comes a time when the Alligator wants to eat.

This is generally a time of low volatility and most traders may want to find another instrument to trade Possible trend forming The lips of the Alligator, the green line, is the fastest moving average and will be the first one a trader will want to monitor.

Trend formed and direction Considering an up trend, the green line lips , crosses the red and sometimes the blue line depending on the market state. Alligator Indicator Explained What Is A Williams Alligator Trading Signal When the 3 lines of the Alligator indicator are intertwined, the Alligator is sleeping. Think of a market that is ranging — we know it will break out and the longer the range continues, the more violent the breakout can be As the green line starts to cross the lips opening , we could be looking at an Alligator getting ready to feed.

Stages Of The Alligator Indicator If the lips green line cross the teeth red and jaws blue line to the upside, consider a bullish Alligator and look for long trades When the lips cross the teeth and jaws to the downside, consider looking for short trades as we have a bearish Alligator potential 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.

It's time to look for an entry point. If the momentum is supported by other traders, then the mouth begins to open wider and wider. The lines of the lips, teeth, and jaws point in the same direction. The distance between the lines starts to increase.

There is a clear trend in the chart. The strength of this trend will be proportional to the time the Alligator slept. The longer the market has been in the accumulation zone, the stronger the momentum will be.

At this moment, you cannot open positions against the trend. Traders who enter trades against the trade by mistake are doomed to failure.

When Alligator is eating, nothing will stop it. When the Alligator is eating, you should trade only in the trend direction, using strong support levels to enter the market: the lines of the lips, teeth, and jaws. After the Alligator is full, the market calms down, the lines lose direction and begin to intertwine with each other. The market needs a break, and the Alligator falls asleep at that moment.

The above figure displays the hourly timeframes of the BRENT oil price chart. In the hourly timeframe, I prefer using the following settings of the indicator 21;13;8, but I will cover it in detail later. On the left side of the chart in the above picture, we see that the Alligator is waking up, a buy signal appears, followed by a powerful uptrend that characterizes the stage when the Alligator is eating with an open mouth.

After some time, the price tests two lines of the indicator: green and red, but the direction of these lines is still up, so the market grows by a few more points. Next, the price breaks through the Alligator lines and updates the local minimum. The lip line crosses the teeth and jaw line, signaling the end of the uptrend. It's time to take the profit.

The next stage of the Alligator trading is sleeping. At this stage, the market is trading flat. It is not recommended to trade in the sideways trend. After sleeping, the Alligator is awakening. The mouth begins to open, and another uptrend starts.

When the green line is above the red one and the red is above the blue, and the price is trading above all the Alligator lines, a buy signal is generated. When the price hits the highest high in the chart, the price enters a consolidation range.

The green line crosses the red one, and the red line crosses the blue one. The Alligator is falling asleep. The Alligator begins to wake up when the distance between the lines begins to increase.

On the right side of the chart, we see that the price is trading below the lines, and they acquire a downward direction. It is a sell signal in the Alligator trading strategy. The downtrend does not last long, and the lines cross each other in the opposite direction. It is time to exit short trades and turn up. The last buy signal appears on the right side of the chart, immediately after the sales are closed. Alligator trading strategies come into two groups.

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 market with additional confirmation. To begin with, let's consider the classic use of the Alligator without using other analysis tools.

That is, the indicator is used in its original form. Open the chart of any trading instrument in the LiteFinance Personal Profile. I will use the gold price chart as an example. 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. That is, it has been relevant to sell gold up to now. At the end of the trading session on January 18, — the beginning of the trading session on January 19, , the Alligator fell asleep.

Starting from the European trading session, the Alligator begins to wake up, the lines start to line up. During the first trading hours of the European session, the price closes above the Alligator's mouth.

We notice this moment and decide to look for an entry point to buy gold. Starting at terminal time on January 19, the price begins to decline to test the support area formed by the Alligator lines.

After the price tested the area of lines congestion support , and after the candlestick closed right at the levels at , we decide to open a long position with a stop loss below the local low of January 18 at The position opening price is There is no trading activity at the US session; the market participants are accumulating trading volume. On the new trading day of January 20, the market closes at the price rise. At the European session, there was a try to reverse the trend down.

The trend continues. Just before the US session, the trade is exited with a Take Profit at This Take Profit level was not chosen randomly. This is the level of the previous local highs. The target of an uptrend is to break through the important high. As we use the Alligator indicator alone, without any additional filters, the stop-loss orders should be placed beyond the local lows and highs, depending on the trend. Take Profit levels are set at the breakthrough of important high and lows.

You can download the Alligator indicator for the MetaTrader on the MetaQuotes official website. MA Method: Smoothed. This strategy is a part of Bill Williams Profitunity trading strategy. Profundity could be a bit complicated for beginner traders, but the Alligator and Fractals trading strategy will suit traders of any level. The Fractals indicator perfectly complements the Alligator. You enter a trade at the fractal breakout when the market trend has already acquired a direction.

This is a trend-following strategy. You spot the moments when the price momentum begins and try to enter at the momentum inception. When the market is trading flat, neither the Alligator alone nor the combination with Fractals will not work. The strategy works on any financial instrument, be it forex, commodities, or cryptocurrencies. The best timeframes to apply are H1, H4 and D1.

In shorter timeframes, there will be many signals, but the quality of such signals will be bad: a lot of market noise, a lot of false signals. Using the W1 timeframe, you will have to expect an entry signal for weeks or even months.

Let us see the optimal settings to trade with the Alligator and Fractals indicators on the H1 timeframe, which allows us to trade intraday or hold trades for three days. You can choose the colors and the thickness of the lines as you want. The Fractals indicator looks like an arrow above the Japanese candlestick up or below the candlestick down on the chart. It indicates the high or low of the price. The Fractals indicator does not require setting parameters.

You only need to set the display color and size of the icons. To enter a buy trade, the Alligator should be waking up. The lip line should break through the teeth line upside, and the teeth line should cross the jaw line from bottom to top. You wait for the moment when the hourly candlestick breaks through the last formed upward fractal and closes above the high. At this moment, you open a buy position. First of all, we determine the place of placing Stop Loss. It is placed below the low of the last formed descending fractal.

We calculate the Take Profit price in such a way that the distance from the trade entry point is twice as long as the distance to the stop loss. There are other variations of setting Take Profit: at the breakthrough of any significant high, at a distance three times greater than Stop Loss, at a strong level of a longer timeframe, etc.

I usually use the method described above. A take profit of two times larger than the potential stop is not bad, and you shouldn't be greedy. To enter a sell trade, the Alligator lines should start sloping down, and the Alligator should be waking up. The Lip line should be below the Teeth, and the Teeth should be below Jaw.

The price should be trading below all the Alligator lines. Expect when the hourly candlestick breaks through the most recent downward fractal and closes below. Open a sell position at this moment. The trade is moved to the breakeven, according to this strategy, when the Jaw line the blue one is below the entry price for a sell trade and above the entry price for a buy trade.

Why should you move the order to the breakeven zone in this case? It is because the Jaw line is responsible for the trend border in the timeframe you trade. If the line is broken out, the trend is likely to change. In this case, you should look for an entry in the opposite direction. There is no point in holding the trade even if the Stop Loss is set beyond the blue. 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. Alligator falls asleep. This pattern of indicator behavior suggests that the trend has been exhausted, and it is not clear whether it will continue in the future.

It is better not to risk, and when a new signal appears in the same direction, enter a new trade. Price breaks through the Jaws line. This indicates a possible trend change. If the price consolidates above the jaws blue line and continues to move in a new direction, the Alligator lines will begin to rebuild and indicate a new direction for trading.

Some traders close the trade manually if the instrument reaches the important and strong level on the longer timeframe chart. Another reason to exit a trade manually if the price passes the average daily move suitable for intraday traders. There could be other conditions. Here everything becomes individual, and you should act, according to your trading system. The candlestick, on which the Signal Fractal was formed, should not touch the Alligator indicator lines.

If the candlestick, on which the fractal was formed, touches the indicator, then such a fractal is considered invalid, and the signal is not traded. 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. But in this case, there will be fewer signals. And vice versa, the shorter is the timeframe, the more there will be signals, but the false signals will be numerous. Personally, I prefer to use the indicator on the H1 timeframe.

This is the optimal timeframe for short-term trading with a trade holding time of 1 to 5 days. A moderate amount of market noise, combined with frequent and clear signals for currency pairs, makes it possible to focus on a few popular instruments and trade without psychological stress. These are the Alligator indicator default parameters offered in the LiteFinance client profile.

On the timeframes of 4 hours and longer, there is less market noise; therefore, more reliable trading signals from any forex indicators appear. The drawback is that it takes more time to wait for the signal. To compensate for this disadvantage, the Alligator indicator should be used with the standard parameters recommended by Bill Williams:.

These are the generally accepted Alligator settings. Any MetaTrader terminal offers such parameters by default. You can apply the Alligator with the standard parameters of 13;8;5.

But there will be many false signals in this case. You will need additional tools, for example, oscillators or the Fractals indicator, to filter out false signals. Let's go the other way and take the periods even longer than with the settings for the H1 timeframe.

We shall take the following numbers from the Fibonacci sequence: 34 for the period and 21 for the shift into the future. These settings reduce the market noise and filter signals. With these settings, you will get a couple of reliable signals for day trading, which is still good for a day trader. It should be borne in mind that the shorter the working timeframe, the greater values should be set for the indicator formula.

The longer the timeframe, the smaller the values can be set into the formula. Before applying the new Alligator parameters in real trading, you need to test them on a demo account or on historical data.

A manual strategy tester will suit the best. The Alligator indicator allows a trader to define the ongoing market trend. It generates the entry points at the momentum inception and signals the trend exhaustion. You can think that the Alligator is a complete trading strategy, but it is not so.

You need additional filters to detail the entry and exit points. For example, you can employ oscillators or other tools, such as Fractals or Price Action patterns, volume indicators, and so on. Listed below, there are primary advantages and disadvantages of the Alligator, for you to decide if the Alligator trading strategy suits you or not. To make up a profitable trading system, you need to be able to combine the Alligator with other indicators. You need additional entry filters; otherwise, there will be many false signals in the sideways trend.

It is clear from the above chart that the Alligator has more advantages than disadvantages. Alligator is a straightforward indicator, included in most trading platforms by default. This suggests that even a beginner can trade with the Alligator. However, for more profitable and comfortable trading, a newbie will have to master other analytical tools in order to detail entry points and filter false signals. Bill Williams' Alligator indicator identifies the trend, flat and the flat end, which is an undoubted advantage over other indicators that often lag behind and generate a signal when the price has already passed a large number of pips in the chart.

It turns out that when trading with the Alligator, you take almost the entire trend movement. A significant flaw is that you need to adjust the Alligator parameters for each timeframe individually. Of course, you can use default settings. 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.

I have collected for you comments written by real traders on the various forums where Alligator is discussed:. Summing up the pros and cons section, I want to emphasize the following: Alligator is not suitable for all traders. However, I suggest everyone should study and try to use the Alligator. At least, studying the Alligator will be useful for self-development and understanding of the working principles. Most of the positive reviews boil down to the fact that the Alligator indicator is simple and its signals are clear.

There is no double interpretation. It is clear when to open a buy or sell position and when to close. Critics argue that Alligator was developed for the stock market a long time ago. It will not work alone, and you will lose your deposit in the flat. It is based on the moving averages, i. And the moving averages themselves are already a derivative of the price. As with any analytical tool and any trading strategy, there are many followers and many haters.

Forex Alligator is a technical indicator that the market stages: trend, flat, the end of flat. The indicator generates trading signals to open a position to buy or sell at the momentum inception, providing an advantage to the trader. It also can identify the dynamic support and resistance levels, where it is profitable to open positions. The alligator was developed by an American trader Bill Williams. Wait until the Alligator wakes up and all its lines arrange in a particular direction.

The lip line should be above the teeth line in the uptrend and below — in the downtrend. Likewise, the teeth line should be above below the jaw line correspondingly. It is also recommended to confirm the entry point using oscillators or other indicators. First, analyze the stage of the Alligator cycle — if it is sleeping, waking or eating.

If the Alligator is waking up, look for an entry point. If the Alligator is falling asleep, exit the trade. Do not trade when the Alligator is sleeping.

For long timeframes H4 — W1, standard settings suit: Jaws, Teeth, Lips: 13;8;5, shift 8;5;3. For timeframes М15 — Н1 use the following settings: 21;13;8, shift 13;8;5. For a 5-minute chart, you can use the settings: 34;21;13, with the shift of 21;13;8. You should test any settings on the historical data before you apply them in real trading.

The Alligator is a simple and efficient indicator, suitable for a beginner trader. It indicates the market state, defines the support and resistance levels to enter a trade.

This article deals with a popular Alligator indicator. It will help you analyze any market, identify the trend, and spot the entry points at the beginning of the trending market, giving an advantage over most traders.

The Forex Alligator or the Williams Alligator is a technical trend indicator that defines the market state and generates entry points at the beginning of the price momentum. As you know, the market can be either trending or consolidating. The Alligator can accurately identify the market situation. Another benefit of the Williams indicator is that it generates the entry points when the momentum is just emerging. Every trader wants to enter a trade at good prices and exit at the peak of a trending price movement.

Using the Alligator, you will be able to pick up strong market moves and take profits at the end of the trend. However, the Alligator alone is not enough to find out good entry points. Bill Williams himself applied Alligator together with other technical indicators he developed. He developed the Profitunity trading system based on the combination of the technical indicators created by Williams.

The trading system applies Fractals and Awesome Oscillator oscillators as additional filters to define entry points. As for other indicators, not included in the Profitunity system, trades use standard oscillators, RSI and Stochastic, as signal filters. The Williams Alligator analyzes stock indexes, equities, commodity and precious metal markets, Forex, and cryptocurrency markets. It is a technical indicator based on the moving averages with different periods.

Moving averages are the price derivatives, so if there is a price chart, and you can attach moving averages to the chart, such a market can be analyzed using the Alligator. The best timeframes to trade with the Alligator are the daily, four-hour, and one-hour timeframes. It makes no sense to use the Alligator in shorter timeframes, as there will be many false signals due to the price noise. For day trading. The H1 will be quite suitable.

Traders employ the Williams Alligator to open both medium-term and long-term positions in the daily or weekly timeframes and the positions during the day or week in the shorter timeframes. The Williams Alligator is a standard technical tool that comes with most trading platforms by default. You can find the Alligator in the list of classic trend indicators of the MetaTrader terminal, as well as in the personal profile of the LiteFinance brokerage company. To see the indicator in the chart, you need to activate it.

Click on the Indicator button and select the Alligator in the list:. It is composed of three smoothed moving averages with different periods. The MAs make up the Alligator mouth; they are the lips, teeth, and jaw.

The Alligator indicator was created by Bill Williams, an American trader, and psychologist. The Alligator is an element of the Profitunity trading system, which also includes the Accelerator Oscillator, Awesome Oscillator, Fractals, Gator Oscillator, Market Facilitation Index, and so on. Over many years, Bill Williams studied the US stock market and watched for regularities.

As a result, he came to a conclusion that classical analysis, the support and resistance levels, trend lines, candlestick reversal, and continuation patterns do not work to predict the future performance of the market. Moreover, he believed that fundamental analysis is something like crystal-ball gazing. Research led the trader to the conclusion that the market is chaos and trading is a psychological game. Knowing the psychology and understanding the principles of behavior of market participants, the zones of accumulation and the moments of price exit from these zones are determined.

If you enter a trade before the price momentum starts and exit at the moments when the trend is being exhausted, big money is made easily and steadily, regardless of single losses. The Alligator indicator was invented to determine the state of the market. By observing the market and accumulating knowledge about it, Williams came to the conclusion that the market's actions are very similar to the behavior of an alligator during the hunt.

The alligator tracks its prey for a long time, observes, plans an attack. Then it makes a sharp dash, grabs the victim, and begins eating. When it is full, it hides and calms down, watching the new victim from the side. Likewise, the market operates. The majority of trades see the trend exhaustion, the accumulation zone forms, there arises uncertainty.

Next, as if out of nowhere, there appears a sharp price momentum, which triggers the stops of the traders who have been holding trades in the opposite direction, trying to trade in the correction. The individual traders betting against the big traders become prey, lose money, and leave the market. Other indicators, included in the Profitunity system serve to filter signals and to detail the entry and exit points in the overbought and oversold markets. Thus, Bill Williams developed an independent trading system and started to teach traders to use it.

Alligator is composed of three smoothed lines, which Williams called lips, teeth, and jaws. The lines are moving averages with different periods and shift to the future. Imagine how an alligator hunts. In the first stage, the predator watches the prey as if it is sleeping.

In the second stage, the alligator opens its mouth and grabs the victim, eats food. You enter new trades just before the Alligator starts hunting and exit all trades before the market calms down.

The hunt begins from the moment when the Alligator opens lips, the market starts to wake up. The green line begins to construct up or down. Then the predator brings its teeth closer to the prey - the red line becomes active and begins to acquire a direction. Then the terrible jaws open up - the blue line is lined up in the same direction with the rest.

The alligator is ready to eat its prey. Now you need to spot a moment for the price to start to trade above or below all three lines of the indicator.

In this case, you open buy or sell positions. The exit signal appears when all three lines meet at one point, the trend direction is not clear, or when the lip line crosses the jaw line. The Alligator Forex indicator is composed of three moving averages, which are called jaws, teeth, and lips. Each of them has a different color and is responsible for a particular stage of the market development.

Each has its weight, strength. Green line indicates Lips; it is the weakest level. 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. The lips line is the smoothed moving average SMA with the default period of 5, moved by 4 bars into the future.

Red line is the teeth. It serves to enter trades when the trend is not that strong. If the instrument is within the daily ATR average price movement , the Teeth line can be an excellent marker for entering trades in the trend. Blue line — the Jaw is the strongest line. The Jaws line displays the border of the medium-term trend. If the price breaks this line, it usually means that the trend is turning in the opposite direction.

To adapt the indicator to different timeframes and markets, you should adjust the parameters periods and shifts of the moving averages. You can also trade with the default parameters, but, in this case, you should trade in longer timeframes from H4 to D1. Taken together, the lines form the "mouth" of a hungry alligator, ready to hunt for inexperienced traders and other market participants who trade against major players.

Note that at the first stage, Alligator sleeps, and the three smoothed moving averages are at the same point. 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. Market conditions are constantly moving from trend to consolidation and vice versa. This is the law of market movements. These states resemble the behavior of an alligator:. When you trade with the Alligator, you should constantly watch the behavior of the three lines. The location of the lines indicates the market state.

Alligator consists of moving averages. Moving averages, as the name implies, show the average price values over a certain period. Therefore, if MAs are in the same place on the chart and do not show any direction with their slope, then the market is not trending. Differently put, the market is trading flat. The lip line green is the fastest moving average. It is the first to react to the changes in the balance of buyers and sellers in the price chart.

When the lip line crosses slower MAs, we could assume that the trend is about to start. The Alligator is waking up. Following the green line, the 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. I should note that some traders 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 last buy signal appears on the right side of the chart, immediately after the sales are closed. Traders can use it across forex, commodities, stock indices , and cryptocurrencies — among the many financial assets. Your Practice. Using the W1 timeframe, you will have to expect an entry signal for weeks or even months. The Alligator strategy suggests trading in the trend direction and opening positions at the most profitable levels. Simple moving average SMA :.

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