Alligator Indicator Explained – What is the Alligator Indicator?

Just like a displaced moving average shifts on the right side of a chart, the Alligator indicator does that too. In a bearish market, shorting a Forex pair works best. In this way, the area between the first line the green one — lips and the last one the blue one — jaws is dynamic support or resistance. Having a funny name, the indicator shows the power of bulls or bears to reverse a trend. Traders are also attentive to closing Candles. Your email address will not be published. Alligator indicator by Bill Williams Downloads Download:

The Alligator indicator is a great Forex trading tool that has been fascinating traders for a long time. While not a moving average, riding trends is its main quality. This article shows how to use the Alligator indicator in Forex in a profitable trading way.

Alligator Indicator Standard Interpretation

For that, the following information is crucial. When using it, think of a system that follows price. No matter where the price goes, the Alligator goes. These averages closely follow price and keep traders on the trend. Because of that, missing a trend is virtually impossible.

The three elements should NOT cross. When doing that, the perfect order forms. Moreover, this signals a strong trend. We all know the saying: The bigger the time frame, the stronger the trend. What can go wrong? Firstly, the price moves aggressively below the green line lips. This is not scary if it is the first attempt.

The more the price tries, the weaker the trend becomes. In a bullish trend, it shows bulls lose steam. Also, they might become wannabe bears. Trading with the Forex Alligator indicator gives two choices: Secondly, look for the perfect order to break.

This is a bearish sign in a bullish trend. In short, trading with the Alligator indicator is easy. Stay long when the price is above it, and short when it is below. The perfect order is a plus. The perfect order is just one Alligator indicator strategy. It mainly deals with spotting the right trend. And sticking to it. However, Bill Williams designed it for other purposes too.

Keep in mind that it shifts the averages further in time. This shifting allows for greater flexibility. In a way, it resembles the Ichimoku Cloud. That is, on the right side of the chart, obviously! Therefore, future support and resistance levels appear at present time. With the cloud, the price is in a state of equilibrium.

It finds a balance between historical and future levels. These shift backward and forward twenty-six periods.

Hence, shifting is not a new concept. Bill Williams sensed its power and used it with the Alligator indicator. A wonderful Alligator indicator trading system deals with support and resistance levels. Moreover, levels are NOT horizontal. You see, traders sometimes make a fatal mistake. They believe support and resistance can only be horizontal. How about dynamic levels? As a rule of thumb, dynamic support and resistance move along with the price.

Therefore, they offer more value. The three lines that make the Alligator Forex indicator jaws, teeth, and lips do exactly that. They follow the price. If the price rises, the three lines follow. If the price falls, they fall too. The bigger the distance between the lines, the stronger the support and resistance area. The bigger the time frame, the more difficult for the price to break through. In this way, the area between the first line the green one — lips and the last one the blue one — jaws is dynamic support or resistance.

For example, in a bullish trend, it shows support. Note the Alligator indicator MT4 support on it. It starts from the green line and ends with the blue line. The lips offer weak support. If bears push stronger, they might reach the teeth. Jaws represent the final support. Trading is fun if a logical approach governs it.

Decisions to buy or sell should come at support or resistance. For this reason, the Alligator indicator formula is a great tool for traders. In fact, they go hand in hand. First, one needs to look for a reversal pattern. This can be a double top or bottom, a head and shoulders pattern or a triangle.

Or, it can be one of the Japanese candlestick techniques. The Japanese were masters in spotting reversals. As such, most of their techniques deal with trend reversal approaches. Use the Alligator indicator Forex platforms provide as confirmation.

Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit.

The high degree of leverage can work against you as well as for you. Brought to you by: Was this article helpful? We use cookies to enhance your visit on our website.

If you continue to use the website, we assume that you agree to the use of cookies. When Alligator is full and happy, he closes his mouth and goes to sleep again — the 3 lines move closer together or intertwine again. Elliott wave traders can use Alligator as a helping indicator to identify impulsive and corrective waves: I don't know the reason for it, possibly usability or visual backtesting just a guess.

Either way, Alligator indicator will only show what's happening now, it won't get any forecasting value no matter what Shift settings are. It also wise for a trader to consider using other indicators rather than the alligator alone. This way, the trader will be able to minimize losses. Keep on studying, mate. Williams is a man who created many useful indicators, but this is not his website: Alligator indicator should be supported by an oscillator to know when the Alligator is sleeping or hungry.

Trades should choose 1 primary time frame to trade with: Then, as the signal appears on the primary time frame, a trader can enter a trade immediately, or as an option go one time frame lower to see the smaller market changes in action and pick a better price for an entry there.

Also the lower time frames help with re-entries. It's all nice in theory, and easy to show past charts, but when you're trading live, and things are moving forward, it's a bit of a different story.

The example here, if you were to go with the point when things actually get drawn on the indicator, you wouldn't even get a confirmation from the alligator until about , which is about pips that it's dropped already.

Alligator indicator by Bill Williams

Once the trend forms, the Alligator helps the trader remain in his position. How to read an Alligator Chart. The Alligator indicator, with a period settings of “13, 8, 5” and shift settings of “8, 5, 3”, is presented in combination with the candlesticks on the above “Daily” chart for the “EUR/USD” currency pair. In the example above, the “Blue” line is the Alligator’s . The Alligator indicator is composed of three smoothed moving averages. Traders will occasionally add an “Oscillator” like the “CCI”, as above in Aqua, to enhance the value of the trading signals. The Alligator indicator is a great forex trading tool that has been fascinating traders for a long time. Having a funny name, the indicator shows the power of bulls or bears to reverse a trend. It adapts most to a trending strategy, but it is famous for calling reversals too.