The alligator is a trend indicator that alerts traders about the formation of a new trend and its direction. Therefore, it’s widely used in trend trading strategies. The alligator consists of three lines which are smoothed simple moving averages . The Alligator strategy is a simple technical analysis tool and an efficient indicator, suitable for a beginner trader. It indicates the market state, defines the support and resistance levels to enter a trade.
The Williams Alligator is a technical analysis indicator developed by the late, iconic forex trader Bill Williams, who has given the indicator his namesake. Lips Line is smoothed moving average, 5 periods, and smoothed by 3 periods. You have noticed that the alligator works with the stochastic oscillator.
The Best Williams Alligator Trading Strategy
While not a https://forexarena.net/ average, riding trends is its main quality. This article shows how to use the Alligator indicator in Forex in a profitable trading way. The course of the moving averages simply identifies the trend direction. If they move down and widen even more, it’s a strong downtrend signal. If they move up and diverge from each other, it’s a sign of a strong uptrend. Note that all three lines are under the price in the uptrend and above the price during the downtrend.
With the cloud, the https://forexaggregator.com/ is in a state of equilibrium. It finds a balance between historical and future levels. Bill Williams sensed its power and used it with the Alligator indicator. Alligator’s Lips is the fastest moving average among the three. It’s the 5-period moving average, which is shifted 3 bars ahead. Alligator’s Teeth is the intermediate 8-period moving average, which is moved 5 bars into the future.
The weakness in the indicator is that timing may lag due to its future positioning, the reason for attaching a momentum indicator to anticipate the Alligator’s signal. The CCI alerts signaled overbought or oversold conditions for each occasion. Candlesticks also provide additional insights into what the expectations of the market might be going forward.
How to read the indicator?
When you click ‘OK’, the blue jaws, the red teeth and the green lips will all appear on your chart. Traders can get caught up in market chop using the Williams Alligator. The way the indicator works can be explained using the following analogy. When the alligator’s jaw, teeth, and lips are closed , it means it is tired or sleeping. This is when many traders avoid taking a position because the trend is too weak. The alligator indicator is a great tool for traders to use, but there are a few drawbacks to using it.
This enables you to profit from increasing forex prices. If you think the indicator is suggesting a downtrend, you can open a ‘sell’ position , which enables you to profit from falling FX prices. If either of your predictions are wrong, you’ll make a loss. The alligator indicator works by showing the relationship between the three moving averages. When the alligator indicator is above the price action, it indicates that the market is in an uptrend.
Alligator indicator: calcolo e formula
A stop loss is set above the high of the most recent upward fractal. The Fractals indicator does not require setting parameters. You only need to set the display color and size of the icons.
But it works best when used together with a momentum indicator. When using the Alligator indicator bear in mind not to use redundant indicators. For example, you can avoid using moving averages because this is the basis for the Alligator indicator. The chart below shows the different phases in the market.
I recommend trying to trade with a reliable broker here. The system allows you to trade by yourself or copy successful traders from all across the globe. You can try trading with the Alligator indicator on the demo account withoutregistration. Listed below, there are primary advantages and disadvantages of the Alligator, for you to decide if the Alligator trading strategy suits you or not. Why should you move the order to the breakeven zone in this case?
- In the second stage, the alligator opens its mouth and grabs the victim, eats food.
- In the RSI indicator, if the RSI is above the 50 level, this means bullish signal and when the RSI is below the 50 level this means bearish signal.
- The orange ellipse showed that the market is moving sideways.
As the price rises, you should watch as it moves below the green line. As mentioned above, the alligator indicator has three lines. As with all indicators with such lines, the most important things to watch are the crossovers. This information has been prepared by IG, a trading name of IG Markets Limited. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information.
The Williams Alligator is also know as the Alligator Indicator, is a combination of 3 smoothed moving averagesand they are displaced moving averages. In this comprehensive guide, we will explain what it is, how to calculate the alligator indicator and interpret it for managing your trades efficiently. In other words, the Alligator is sensitive to the various crossings of differently timed moving averages. In an uptrend, look for trade setups where the indicator and a support level meet, but in a downtrend, look for setups where the indicator lines and a resistance level meet. You should keep one thing at the back of your mind though — being a moving average based indicator, the Alligator does significantly lag the price. Moreover, the moving averages are shifted by 3, 5, and 8 periods into the futures.
The same thing happens with displaced moving averages. If you test a strategy back in time and don’t consider the shift, the results are subject to interpretation. Confirming trending moves with the Alligator could put you in a trend that might exceed your expectations. Yes, this indicator is based on the moving averages as well. However, it’s one of the most reliable indicators in the forex market. There’s no difference in which trading platform you use.
If, during a cross to the upside, all three lines expand, it confirms an uptrend. A cross to the downside with expanding lines confirms a downtrend. The lip is set up with the 5-bar SMMA and smoothed by 3-bars on subsequent values. The Jaw is set up with the 13-bar SMMA and is smoothed by 8-bars on subsequent values. The more time the Alligator spends sleeping, the hungrier it becomes and when it wakes up; When it eventually wakes and is prepared to hunt bulls and bears, see fig.
Parameters may https://trading-market.org/ upward during periods of high volatility. Stop Loss in the area of the fast average (Alligator’s Lips) often leads to quick closes on small corrections and rollbacks after which the trend resumes. Trading in Forex/ CFDs and Other Derivatives is highly speculative and carries a high level of risk. These products may not be suitable for everyone and you should ensure that you understand the risks involved.
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At the far right of the chart, the Alligator is opening its mouth again, or awakening, signaling a downtrend. In summary, the alligator indicator is a valuable tool for traders to identify trends and potential entry and exit points when trading stocks. By understanding the indicator and how to use it, traders can make informed trading decisions and manage their risk effectively.
The Alligator opened its jaws and eats until it is satisfied. During the lateral market movement, it is not safe to conclude transactions – the indicator may generate false signals. Before you practice trading with the alligator indicator, there are a few points you should be aware of. A SELL signal comes when the price breaks the Alligator indicator from top to bottom, the last 2-3 candles are closed below the intersection point. Determine your exit point after the “CCI” warns of an oversold condition and a candlestick closes above the Red middle line.
While it seems logical, most traders fail to recognize the time frame’s importance. The chart above is the EUR/USD hourly time frame in a bullish trend. It starts from the green line and ends with the blue line. Any move beyond and bulls end up in the Alligator’s stomach. Regardless of whether it is part of an individual trading system or not, the Alligator indicator shows the right side of the market.