This is close, but the actual calculation of this indicator is slightly more complicated than that. This line is made up of a 5 period simple moving average, which is being smoothed by 3 bars. This is the fastest moving average out of the three. This line is made up of an 8 period simple moving average, which is being smoothed by 5 bars.

This line is made up of a 13 period simple moving average, which is being smoothed by 8 bars. This is the slowest moving average out of the 3, and you can remember the position of this line as being the furthest away from the candlesticks on your chart. So now that we know what each of the lines on the Williams Alligator do, we need to understand what these lines are used for and how they interact with each other, so that we can implement them into an effective trading strategy.

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How to Filter Macd False Signals, Best Strategy for Williams Alligator Indicator Explained. This indication is basically a slightly more sophisticated moving average. Some individuals like to be aggressive traders others like to be dormant.

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Clearly this takes a bit more interaction in your place so there is a time-control stand off. Ultimately you have to do what you feel comfortable with. It is your cash after all. When your trading plan passes the back-testing stage, you can start trading with your own account cash. 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. The indicator applies convergence-divergence relationships to build trading signals, with the Jaw making the slowest turns and the Lips making the fastest turns. Article Sources. Investopedia requires writers to use primary sources to support their work.

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The other times, the market is more in a trading range condition that can be difficult to trade. 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. The Williams Alligator is also know as the Alligator Indicator, is a combination of 3 smoothed moving averages and they are displaced moving averages.

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 3 lines are intertwined, we do not have a trend. This is generally a time of low volatility and most traders may want to find another instrument to trade.

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. You want to see the green line cross both of the slower moving averages. This is a sign that the Alligator is waking up. We will also see the lips and the jaw start to turn in the direction of the green line.

Considering an up trend, the green line lips , crosses the red and sometimes the blue line depending on the market state. The red line teeth starts to head upwards crossing the blue jaw line and we now determine an uptrend is in place. When the 3 lines of the Alligator indicator are intertwined, the Alligator is sleeping.

When an Alligator is sleeping, nothing interesting is going on. The longer the Alligator sleeps, the hungrier it may be when it awakes. 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.

This is the time that you want to be on alert for a trading opportunity. As the green line continues in one direction, the red line which represents the teeth of the Alligator, begins to separate and move in the same direction — the teeth are opening.

The trader is looking to feast on the price action that is happening. 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.

There are several trading strategies you can use and keep in mind that all indicator based strategies do lag the market. The indicator alerts us to 3 stages of market development and when understanding those, you can design a simple approach to trading the market:.

You must keep in mind that since we are using displaced moving averages, each of the 3 lines will be plotted ahead of price by the factor of the displacement — 3, 5, and 8 periods. This may affect the trading strategies you use. When the Alligator is sleeping, the market is range bound and a range trading strategy may be used which can give you a jump into the market early. 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.

Trading Ranges and Breakouts When the Alligator is sleeping, the market is range bound and a range trading strategy may be used which can give you a jump into the market early. Trading Pullbacks In Price Once the lines have shown a direction, you can resort to using a price pattern that is a staple of all traders — pullbacks.

Alligator Pullbacks You can determine the length of pullback needed by choosing where price has to pull back to. Alligator Line Cross The simplest trading strategy and trade signal for the Alligator is to trade the close of a candlestick after it crosses the lines. Candlestick Cross and Close Note the the green line has crossed over the red to the downside.

Green line has crossed the red to the downside Short at the low of the candlestick that closed below all 3 lines Close your position when a candlestick closes above all 3 lines 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. Summary The most important part of the Bill Williams Alligator is when the 3 lines are mixed together.

Further Reading 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: Trade Entry Triggers Trading With The 50 Period Moving Average Where To Place Your Stop Loss. Author: CoachShane. Shane his trading journey in , became a Netpicks customer in needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading.

This has allowed less time in front of the computer without an adverse affect on returns. July 22, at pm Reply. April 2, at pm Reply. April 3, at pm Reply.

November 13, at am Reply. May 20, at am Reply. January 9, at pm Reply. Leave a Reply Cancel reply. post a comment.

The Fractals indicator looks like an arrow above the Japanese candlestick up or below the candlestick down on the chart. When the price hits the highest high in the chart, the price enters a consolidation range. This site uses Akismet to reduce spam. Here everything becomes individual, and you should act, according to your trading system. 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.

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