It is clear from the chart, the (XAUUSD) has been trading in a downtrend up to now. All the attempts to drive the price up have been absorbed. When the price was above the Alligator lines, the lines themselves didn’t change their direction. To begin with, let’s consider the classic use of the Alligator without using other analysis trading tools. That is, the momentum indicator is used in its original form. In a trading range, the Alligator’s “mouth” is closed.
In this case, you should look for an entry in the opposite direction. There is no point in holding the trade even if the Stop Loss is set beyond the blue. This will signal that there should be an entry point to open a position following an uptrend. To enter a buy trade, the Alligator should be waking up. The lip line should break through the teeth line upside, and the teeth line should cross the jaw line from bottom to top. After the Alligator is full, the market calms down, the balance lines join after they lose direction and begin to intertwine with each other.
Risk management when using the William Alligator
It is clear from the above chart that the Alligator has more advantages than disadvantages. Alligator is a straightforward indicator, included in most trading platforms by default. This suggests that even a beginner can trade with the Alligator.
You can also trade with the default parameters, but, in this case, you should trade in longer timeframes from H4 to D1. MEDIAN PRICE — median price;HIGH — the highest price of the bar;LOW — the lowest price of the bar;SMMA (A, B, C) — Smoothed Moving Average. A parameter is for data to be smoothed, B is the smoothing period, C is shift to future. If you want to adjust Alligator settings to different timeframes, you should perfectly understand this indicator’s work principles. It should be borne in mind that the shorter the working timeframe, the greater values should be set for the indicator formula.
It doesn’t need to create a separate window for itself and appears as an extra indicator or your main chart. Also, the indicator comes custom-built into TradingView, MT4, and MT5, three of the most popular trading platforms. The alligator indicator can be used in any market or time frame.
Volume Weighted Average Price (VWAP)
This is an improved version of the trend following Williams Alligator, through the use of five Trend Regularity Adaptive Moving Averages (TRAMA) instead of three smoothed averages (SMMA). This indicator can double as a TRAMA Ribbon indicator by reducing the offset to zero. Whereas the active offset can double as a forecasting indicator for options and futures. MFI and Awesome Oscillator According to the Market Facilitation Index Oscillator, the Squat bar is colored blue, all… Alligator is a momentum-based indicator, the main ability of this indicator is to determine market trend and its direction.
In most cases, buying opportunities emerge when the three lines make a crossover. The lips are usually the inside ones followed by teeth and jaw, as shown below. The exit strategy is triggered when the price crosses the three lines. When applied, the Alligator indicator has three lines. In default, the three lines are in red, blue, and green. The red line is known as the teeth while the blue line is the jaws.
- As such, it is best to use a tight stop loss and combine this strategy with other technical indicators.
- This script expands on that and checks 10 different multipliers to see trend over the long term and have 10 values.
- But when constricted, it signals that a trend is about to end or that the market is in consolidation.
- When three MAs line up in the same direction, the trader decides whether to enter the market or not.
- Note that the moving averages are calculated by the median price ((high+low)/2).
Welles Wilder and was featured in his book “New Concepts in Technical Trading System”. It was originally designed as a volatility indicator able to capture gaps in… Hello I’ve decided that the alligator lines can be used to find a trend. This script expands on that and checks 10 different multipliers to see trend over the long term and have 10 values. Those 10 values each give a color to one of the 10 lines in turn giving this Fire like plotting. I personaly use this to see if there is fear (red) in the markets or greed…
Moving the trade to the breakeven
When you trade on a one-hour chart, the period ranges from one to four days. When you work in shorter timeframes, a trading signal octafx review works out during one or two trade sessions. The Alligator technical indicator allows a trader to define the ongoing market trend. It generates the entry points at the momentum inception and signals the trend exhaustion.
The chart below shows the Williams Alligator applied in a Microsoft chart. Technical indicators are essential tools that help traders predict the future price of financial assets. These indicators are created using complex statistical formulas. The indicator will flash false positives when the three lines repeatedly crisscross each other due to choppy market conditions. According to Williams, the alligator is “sleeping.” You’re to remain on the sidelines until it wakes up. This exposes a significant drawback of the indicator because many awakening signals within large ranges will fail, triggering whipsaws.
In the Eating phase, the Alligator’s lines are fully spread apart, with the Jaw, Teeth, and Lips in ascending order from bottom to top. This phase reflects a well-established trend in the market. Breakouts from the previous range-bound conditions are more likely to happen, offering trading opportunities in the direction of the emerging trend. Traders should exercise caution during the Sleeping phase and avoid making significant trading decisions, as breakouts or trend reversals are less likely to occur. Sign up now for FREE access to our exclusive trading strategy videos.
When the market “saturates,” it calms down, and then the same begins, and so on in a circle. The Alligator indicator was created by Bill Williams, an American trader, and psychologist. Williams described the Alligator indicator in his book ‘Trading Chaos’ in 1995.
However, Alligator is present in every Forex trading platform by default, so there is no need to calculate these values yourself. The tool easily integrates with coinmama review other indicators.It is easy to identify areas of divergences or reversals. Finally, always wait for the trend to form before executing a trade.
It is a technical indicator based on the moving averages with different periods. Scalpers typically use extremely tight timeframes like 5-minutes and even 1-minutes. In most cases, the William Alligator is not a popular one in scalping.
