Alligator Indicator: What Is It and How It Works? [Lesson 15],Reader Interactions
25/07/ · How does the Alligator indicator work? The Alligator works by plotting different moving averages on a chart. It uses three moving averages, and each represents part of the 13/12/ · The Williams Alligator indicator is a technical analysis tool that uses smoothed moving averages. The indicator uses a smoothed average calculated with a simple moving The Alligator indicator is common on Metatrader4 trading software, and the calculation formula sequence involves these straightforward steps: The Alligator’s Jaw, the “Blue” line in the 28/07/ · The Alligator indicator is a trend indicator that consists of three lines – smoothed moving averages. Bill Williams called these moving averages balance lines. Each of them 09/12/ · How does the alligator indicator work? Like numerous other pattern trading indications, the alligator indicator works by plotting numerous moving averages (MAs) on a ... read more
Below is an example of a graph showing the alligator indicator the three colored lines , accompanied by the line that defines the price.
We made the example using one of the best free platforms, IQ Option. In this capture, as we will see later in the article, the trend is upward because the lines are arranged in order green high , red medium , blue low. Next, we will analyze the indicator from a more technical point of view.
First, with the Alligator indicator we can identify a trend in progress by analyzing its direction and strength. First we analyze the three lines figuratively as the jaw, teeth and lips of the alligator. Now, from a technical point of view these 3 lines correspond to 3 types of SMA Simple Moving Average.
It is important to remember that, when these lines are very close or overlapping, the alligator is sleeping and it is recommended not to place orders.
Of course, at that point the market is not in a trend, but it could wake up suddenly. Therefore, it is better to be vigilant that is why the alligator has also been chosen from the animals.
Go to Lesson 16 — Bollinger Bands. From today, you can start trading CFDs through a demo account with this world leading platform , authorized by CYSEC. Your email address will not be published. The Lips crossing down through the other lines signals a short sale opportunity while crossing upward signals a buying opportunity. Williams refers to the downward cross as the alligator "sleeping" and the upward cross as the alligator "awakening. The three lines stretched apart and moving higher or lower denote trending periods in which long or short positions should be maintained and managed.
This is referred to as the alligator "eating with mouth wide open. This indicates the alligator is "sated. The indicator will flash false positives when the three lines are crisscrossing each other repeatedly, due to choppy market conditions. According to Williams, the alligator is "sleeping" at this time. Remains on the sidelines until it wakes up again. This exposes a significant drawback of the indicator because many awakening signals within large ranges will fail, triggering whipsaws.
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" phase. On the rise, the price drops to the Jawline, but the indicators do not cross each other. The trend remains up. An alligator "sated" sell signal arrives when the Lips cross below the Teeth and Jawlines and lines intertwine as the price moves sideways.
The alligator "sleeps" for some time before a new awakening signal goes off, and the uptrend commences with another "eating with an open mouth" phase. The price continues to rise but in a weak fashion. Then there is a sell-off and the mouth opens to the downside, signaling a downtrend.
The lines cross again, signaling that the alligator is "sated. The Alligator indicator can be used in any market or time frame. In the lower-left of the chart, the Alligator opens up, and an uptrend remains in place for some time. The lines then cross, and two small downtrends develop. This is followed by a buy signal to the upside, which results in a brief uptrend. As the price pulls back, the Alligator is sated, and then it opens again for a big uptrend.
This is followed by an extended sideways period, in which the indicator lines crisscross back and forth. This is a sleeping phase, and most traders are best to stay away. At the far right of the chart, the Alligator is opening its mouth again, or awakening, signaling a downtrend.
Bill Williams' Alligator indicator provides a useful visual tool for trend recognition and trade entry timing, but it has limited usefulness during choppy and trendless periods. Market players can confirm buy or sell signals with a moving average convergence divergence MACD or another trend identification indicator.
Bill M. Technical Analysis Basic Education. Technical Analysis. Advanced Technical Analysis Concepts. Company News Markets News Cryptocurrency News Personal Finance News Economic News Government News. Your Money. Personal Finance. Your Practice. Popular Courses. Technical Analysis Advanced Technical Analysis Concepts. What Is the Williams Alligator Indicator? Key Takeaways The Williams Alligator indicator is a technical analysis tool that uses smoothed moving averages.
The indicator uses a smoothed average calculated with a simple moving average SMA to start. It uses three moving averages, set at five, eight, and 13 periods. The three moving averages comprise the Jaw, Teeth, and Lips of the Alligator.
Trend indicators. The late, iconic forex trader, Bill Williams made the Williams Alligator technical analysis indicator in He has given the indicator his name. He was also created other leading indicators commonly used by traders today. The Alligator indicator follows the premise that financial markets and individual securities trend just percent of the time. While grinding through sideways ranges the other percent of the time. The developer believed that individuals and institutions collect most of their profits during strongly trending periods.
Click here to get started for free with TradingView! The Alligator is as much a metaphor as it is an indicator. Three lines make the indicator, overlaid on a pricing chart. They represent the jaw, the teeth, and the lips of the beast. He created it to assist traders confirm the presence of a trend and its direction. The indicator can also assist traders designate impulse and corrective wave formations.
But it works best when used together with a momentum indicator. If you mix the three lines, the mouth of the Alligator closes and traders say it is sleeping. As it sleeps, it gets hungrier by the minute, waiting for a breakout from its slumber when it will eat.
When the trend takes shape, the Alligator wakes and begins eating. Once full, it closes its mouth once again and goes back to sleep. The Alligator indicator makes use of three smoothed moving averages , set at 5, 8, and 13 periods. They are all Fibonacci numbers. The creator of the indicator was an early pioneer in financial market psychology.
He made some of the most widely used technical indicators today. You can use the Williams Alligator indicator to find the absence of a trend. Also, trends that are starting to form and markets that have started trending. Technical traders can use this information to decide when to enter or leave the market.
He created the indicator on the rule that the asset should trend between 15 and 30 percent of the time. They do this while stuck in a tight trading range the other 85 and 70 percent of the time. The creator was sure that the former is when most institutional traders book most of their profits.
Also, the moving averages that make up the Alligator indicator can often act as dynamic resistance or support. You can use it as a buy or sell signal depending on which way the lines crosses. Also, if candlesticks close above or below the lines of the indicator. Three lines make up the indicator, overlaid on a pricing chart. Williams created it to assist traders in confirming the presence of a trend and its direction. The Alligator indicator can also assist technical traders to determine impulse and corrective wave formations.
But it works best when combined with a momentum indicator. Three smoothed moving averages make up this indicator. The Green line moves first when the Alligator wakes up. The red line follows, to confirm a breakout in a new direction.
The CCI sent an overbought alert first. The Alligator lagged, but confirmed the signal after a candle closed below the three-line set. The weakness in the indicator is that timing may delay as a result to its future positioning.
This is why you need to attach a momentum indicator to anticipate the signal of an Alligator. The Alligator helps traders remain in the position for a longer time and works best the longer the sleep period. In the above example, you would remain in the trade until a candle ends over the middle Red line. Other traders have included their ideas to enhance the reliability of this indicator.
The indicator makes use of convergence-divergence relationships to develop trading signals. The Jaw makes the slowest turns and the Lips make the fastest turns. The Lips crossing down through the other lines indicates an opportunity of a short sale. While crossing upward indicates an opportunity to buy. The indicator provides signals when the three lines — Jaw, Teeth, and Lips meet and separate.
They signal a change in trend. When the three lines diverge widely, a trend is strong indicating that the mouth of the alligator is being fed. This is according to Williams.
But when the three lines start narrowing and converging, it shows that a trend is weakening and may soon reverse. It also shows that a strong move is near. Traders will then want to observe for a cross of the blue and green lines. They also observe for a close of a candle through the lines of the indicator before taking action. No trading tool is perfect. This means that traders are always looking for means to apply various indicators.
Some traders may look at a trend indicator that uses a different method to see if it confirms the signals. This is in relation to using an Alligator indicator for instance. This will help get rid of false signals in the sleeping phase of the Alligator indicator. It might also improve the timing of the trading signals. It is common for traders to get caught up in market chop when using the Williams Alligator.
According to Williams, during that situation, the alligator is still sleeping and is yet to awaken. This suggests that traders need to wait for other confirmation.
They should also wait for the price to reflect the trend change signaled by the indicator. Traders should try to look at a mouth opening during price rise or decline. They slowly close once again when volatility dwindles, showing a potential trend change ahead due to the current trend weakening.
Most of the charts you can see on the website come from there. They let you freely chart almost any asset with all indicators you could think about.
Click here to get start on TradingView for free! Williams Alligator indicator is a complex, but very important and profitable technical analysis tool. One of the most legendary forex traders to ever live made this indicator. Traders can use it across forex, commodities, stock indices , and cryptocurrencies — among the many financial assets. Trading software can be expensive, but some platforms feature built-in charting tools right within the trading dashboard.
This offers incredible value for traders. 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. Why hope for your trading to work when you can precisely know the performance stat of every pattern? Do you want to follow a great video course and deep dive into 26 candlestick patterns and compare their success rates?
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Get All Tips for Profitable Trading. The Moving Average Convergence Divergence MACD is both a momentum and trend following indicator. It is calculated by A SMA Simple Moving Average indicator calculates the average of prices for a given number of periods. The SMA is used The Aroon indicator is composed of two line:An up line which measures how far is the previous highA down line wich The Mcginley Dynamic indicator is an indicator that is based on moving average line indicator with a soothing There are various technical indicators that have made the analysis of the financial markets remarkably easy.
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Williams Alligator Indicator: The Complete Guide Trend indicators. The Williams Alligator indicator is composed of 3 lines. Each line is a Moving Average is a different period It helps traders understand the market trend and potential reversal.
When the fastest line is above the middle one which is above the slow one, trend is up.
Williams Alligator Indicator,How Does The Alligator Indicator Work?
28/07/ · The Alligator indicator is a trend indicator that consists of three lines – smoothed moving averages. Bill Williams called these moving averages balance lines. Each of them How to use the Alligator Indicator. The indicator provides signals when the three lines – Jaw, Teeth, and Lips meet and separate. They signal a change in trend. When the three lines 09/12/ · How does the alligator indicator work? Like numerous other pattern trading indications, the alligator indicator works by plotting numerous moving averages (MAs) on a 13/12/ · The Williams Alligator indicator is a technical analysis tool that uses smoothed moving averages. The indicator uses a smoothed average calculated with a simple moving 25/07/ · How does the Alligator indicator work? The Alligator works by plotting different moving averages on a chart. It uses three moving averages, and each represents part of the The Alligator indicator is common on Metatrader4 trading software, and the calculation formula sequence involves these straightforward steps: The Alligator’s Jaw, the “Blue” line in the ... read more
A SMA Simple Moving Average indicator calculates the average of prices for a given number of periods. Therefore, it is better to be vigilant that is why the alligator has also been chosen from the animals. Find The Best Candlestick Pattern Now. If you wish you can open a demo account with IQ Option from here. Save my name, email, and website in this browser for the next time I comment. You want to see all lines pointed in the same direction, in order. Williams created it to assist traders in confirming the presence of a trend and its direction.
The three moving averages comprise the Jaw, Teeth, and Lips of the Alligator, opening, and closing in reaction to evolving trends and trading ranges:, how alligator indicator works. When this occurs, section of the previous high and low and using your entry tactics, trade inside the range. But it works best when combined with a momentum indicator. In the above example, you would remain in the trade until a candle ends over the middle Red line. Trading how alligator indicator works financial markets is not as easy as many make it out to be. Related Terms. You can determine the length of pullback needed by choosing where price has to pull back to.
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