But once price nears the end of the trend, you can see that the Alligator starts to sleep. One can of course, use other additional indicators in order to further filter the trends. You can also combine the Alligator indicator with price action-based techniques such as trend lines and horizontal support and resistance levels. 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.

• The author said that if the lines of the Alligator intertwine, then the beast is asleep, and the longer it continues, the hungrier it becomes.
• The Green line moves first when the Alligator wakes up.
• As the Alligator continues sleeping, there will reach a point where hunger begins to set in, and he will slowly open his mouth to eat.
• As you can see on the chart, three lines are intertwined and the asset price shows the same highs and lows.
• At the same time, the spacing of the Alligator lines is supporting your short trade.
• It helps to enter a trade at the very beginning of a trend.

Alligator Indicator is proved to be efficient even in modern conditions of high-frequency trading. When the Alligator is feeding, watch for pullbacks against the main trend direction and trade those moves with a pullback strategy. Candlestick Cross and CloseNote 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.

There are various technical indicators that have made the analysis of the financial markets remarkably easy. 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. Also, trends that are starting to form and markets that have started trending.

What is a Forex Indicator?

Traders can choose to filter and find entry points according to their own market analysis. We conclude a deal only after the chart leaves this zone in the direction of the trend. In a rising market, the candle closes above the moving average with a period of 8. After that, a deal is made to buy with the stop at a recent local low. In a falling market, we work according to mirror rules. In this strategy, the Alligator indicator is used without additional filters.

The Alligator is often used together with the Fractals indicator. You should test any settings on the historical data before you apply them in real trading. First, analyze the stage of the Alligator cycle – if it is sleeping, waking or eating. If the Alligator is waking up, look for an entry point. First of all, we determine the place of placing Stop Loss.

The absence of a trend

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.

Williams approached the current behavior of the market instead of looking at past behavior to determine future outcomes. His indicators are designed to detect changes in the traders’ collective behavior that lead to the formation of new trends. Is when the green line is above the red line and the xcritical app review red line is above the blue line, there is an uptrend, and when the order of the lines is reversed , the market is in a downtrend. All this can tell traders about the direction of the trend. The indicator sends a signal to open the order when the moving averages are separated from each other.

Any statements about profits or income, expressed or implied, do not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. Place the first take profit at the level of the last trend extremum, then either use a trailing stop or set take-offs at a distance of 2-3 x Stop Loss from the entry point.

Once full, it closes its mouth once again and goes back to sleep. As mentioned earlier, the bitfinex review is very simple in the way it is devised. According to Williams, he believed that many trading systems fail because they rely on the predictability of the trends. He maintains that a good trading system is one which can predict the unknow. But this is not the case when it comes to the alligator indicator.

Examples of the Williams Alligator Indicator

It is known that any trading platform, including Forex, is in a state of a trading range for about 80% of the time. At this time, no forecasts are made, because the price is in a chaotic movement and it’s quite problematic to anticipate its further course. Then the market sets a trend – when the price has a clear direction. During this period, traders enter an active analysis phase, trade, open deals, and make a profit. Using indicators that work with the trend, you can accurately determine the favorable time to enter the market and control your trading.

This indicator was created to help traders to confirm the presence of a trend and its direction. Our traders may also need another article about “What is Forex trading and how does it work”. As the Alligator opens up, and an uptrend remains in place for some time. Stop trading when the alligator is falling into sleep when the lines unfold inward or intersect.

Trading with the Alligator indicator

When the lines are together, or a short distance away – this indicates the range state. In the latter case, speculators shouldn’t open the positions. Starting to study this Forex trading indicator, you should understand that Bill Williams’ strategy doesn’t have the usual technical analysis methods. The author argued that excessive deepening in the market analysis isn’t useful. It’s much better to know how the stock exchange works and to understand the trade mechanisms from within. Therefore, the Alligator indicator is significantly different from other groups of trading robots.

The main purpose of the Alligator indicator is to keep trading simple. Similarly, other indicators that overlay on the chart are also not required. Below is an example of the Alligator indicator on your price chart on the MT4 trading platform. Following this, price breaks the rising trend line and starts to develop into a downtrend.

When the lip line crosses slower MAs, we could assume that the trend is about to start. The teeth line is the 8-period smoothed moving average that is moved five days into the future. The Alligator Forex indicator is composed of three moving averages, which are called jaws, teeth, and lips.

Alligator with support and resistance levels

Bill Williams explained the punching of the range by the fact that, after sleep, the Alligator is hungry, and to be satisfied, he hunts for the price. Once you have it, use the Alligator for confirmation (i.e. wait for the green line to cross other lines). As was previously mentioned, the creator of the Alligator, Bill Williams, named the three lines the ‘balance lines’. When the Alligator selling signal matches with the RSI bearish signal then you can sell the stock. The Williams Military Boot Camp Schedules at a Glance is composed of 3 lines.