Alligator Indicator Explained

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what is alligator indicator

It will not work alone, and you will lose your deposit in the flat. It is based on the moving averages, i.e., it is the derivatives of the moving average. And the moving averages themselves are already a derivative of the price. As we use the Alligator momentum 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. I should note that the three balance lines are the moving averages that are applied to the median value ((high+low)/2), not to the bars’ opening or closing prices.

  • It indicates the market state, defines the support and resistance levels to enter a trade.
  • I have spent many years testing and reviewing forex brokers.
  • Let me explain how to trade with Bill Williams’ Alligator indicator.
  • Bill Williams uses the behavior of an alligator to explain what is happening in the market.

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. If the momentum is supported by other traders, then the mouth begins to open wider and wider. The balance lines of the lips, teeth, and jaws point in the same direction.

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. Using a Forex example, this is a daily price chart of the GBPUSD leading into December 2021. But as you know that price does not move in a straight line but moves in a series of peaks and troughs. The value of an investment in stocks and shares can fall as well as rise, so you may get back less than you invested. The Take Profit is set at the distance twice as much that of the stop loss. First of all, we determine the place of placing Stop Loss.

Alligator Indicator Explained

The same logic of multiple timeframes can be applied in various time frames including a very short- term to very long term. Similarly, once you identified downtrend in daily, you will look for the uptrend in 4 Hour chart. In simple words, you are looking for a wave inside the flow to identify the move in a different direction so as to identify a proper entry point. So you may aim to enter a wave in a smaller time frame say 4 hours in a different direction to find a good entry point. You should always enter the trade when it is entering into a particular trend and avoid when these lines are twisted together. A bullish fractal has a middle candlestick with the lowest low, among other candlesticks.

what is alligator indicator

The Williams Alligator is a standard technical analysis 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, Forex trading tips as well as in the personal profile of the LiteFinance brokerage company. However, the Alligator alone is not enough to find out good entry points and it is usually combined with more complex instruments.

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there has been happening a lot since my last DAX30 analysis eleven days ago. I have closed my short positions with some profits and kept quite until the beginning of this week, waiting to bring my long trades into the race. If you remember, I revised my initial expectation from ‘call’ to ‘put’ as I expected the correction not be finished – or… The Williams Alligator is an excellent market analysis tool suitable for both a beginner in training and an experienced professional trader. Although the indicator was created a long time ago, it still works.

What Is The Alligator Indicator & How To Trade With It

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. This is one of the better trend indicators out there if you are looking for both range trading and with trend setups. 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.

It is placed below the low of the last formed descending fractal. There is no trading activity at the US session; the market participants are accumulating trading volume. Here are some of the frequently asked questions about the Williams Alligator indicator. Fibonacci numbers are special because they seem to have an uncanny ability to appear in nature, either directly or indirectly.

How much does trading cost?

When a moving average with a shorter period breaks above a moving average with a longer period, it’s a buy signal. Conversely, when an MA with a shorter period falls below the MA with a more extended period, it’s a sell signal. The alligator indicator can be applied in different conditions and trading strategies. Before we start observing them, it should be noted that this trading tool proves to be useful only during trending markets. When the asset keeps moving sideways, the alligator is ‘sleeping’.

It turns out that when trading with the Alligator, you take almost the entire trend movement. When you trade with most other indicators, you enter the market at the trend’s end and could face the risks of the trend reversal and closing a position by stop. While that trade management strategy is the easiest, it isn’t usually the most practical strategy. Other ways to set your targets include using market structures and price action tools, such as support and resistance levels.

MACD Indicator: The Ultimate Guide

You only need to set the display color and size of the icons. The lines do not indicate a specific direction, they are located in the horizontal plane. Labor Market and Real Estate Market data was published yesterday. Today the traders should pay attention to the Retail sales in Canada.

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And that’s why some traders rely on the Alligator breakout strategy. Unlike other technical indicators, the William Alligator indicator is easy to use. When you open it, it appears as three lines (red, green, and blue) that constantly cross over one another as trends change. Each line has dramatic names from the body parts of the alligator animal. You can always combine this with other indicators to improve its effectiveness and confirm your signals.

What Williams Alligator Stands For

The Alligator indicator was introduced by the legendary Bill Williams. In addition, traders also have the freedom to choose from simple, linear weighted, and exponential methods. This changes how the indication is carried out and changes according to the preferences of the trader.

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An Indicator based on the William Alligator, helping to find suitable entry and exit points. 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. This is a state whereby the three lines of the Alligator indicator are intertwined or close together. By now you know that there are three crucial information shown by the Alligator indicator.

After clicking on Alligator, a dialogue box with the default setting will appear. You can use the default settings or change whichever parameter you want. For example, ‘Apply to’ can be the close price or median price. Bill Williams used the different parts of an alligator’s mouth to describe the three moving averages. As one of the few indicators that use a multiple moving average strategy, the component moving average lines have specific default colors to ensure clarity. Applying tools such as the Williams Alligator and stop-loss protection makes it possible for traders to grow their profits quickly, safely, and using very little starting capital.