Alligator indicator: Williams Alligator MT4 Indicator Know If There Is A Trend Or Not

That is, the momentum indicator is used in its original form. Based on this formula, we see that the value of each indicator line can be calculated manually. However, Alligator is present in every Forex trading platform by default, so there is no need to calculate these values yourself. Next, the lip line is the first to react, as it is the fastest. Next, the teeth line reacts, and the jaw line is the last to react.

The longer the Alligator sleeps, the hungrier it wakes. When it wakes up from a long sleep, it opens its mouth and gets ready to take a big bite of the market. The Alligator will chase the price far away and offer a decent profit to a trader. Having eaten enough, the Alligator goes back to sleep , so it’s time to take profit.

Williams Alligator MT4 Indicator – Know If There Is A Trend Or Not

The price should be trading below all the Alligator lines. Let us see the optimal settings to trade with the Alligator and Fractals indicators on the H1 timeframe, which allows us to trade intraday or hold trades for three days. You spot the moments when the price momentum begins and try to enter at the momentum inception. When the market is trading flat, neither the Alligator alone nor the combination with Fractals will not work.

If they move down and widen even more, it’s a strong https://forex-world.net/ signal. If they move up and diverge from each other, it’s a sign of a strong uptrend. Note that all three lines are under the price in the uptrend and above the price during the downtrend.

How to interpret Alligator indicator

Once you become accustomed to the various signals provided by the Alligator, applying a related strategy in real time follows a predictable pattern. First, the Alligator sleeps, begins to wake when the ranging period concludes, and then persuades you to hold on while it feeds. The latter point is one more rule to follow – stay in the trade while the three lines are apart.

• In other words, patience is required until opportunities arise during the 20% to 30% trending periods.
• The reason for this can be found within the formula of the TEMA.
• The Williams Alligator is the standard indicator that is always on the list.
• On the price chart, the lines can stay together intertwining , or they can diverge from each other , and stay more or less parallel to each other for some time , and then converge again .
• You should not trade with the Alligator when the market is trading flat in a wide trading range.

The latter period of the chart shows all three moving averages falling below the price line. The idea is to enter trades when jaws are opening to catch the forming trend. Alligator makes recognizing trends easier and gives us the opportunity to join them. Keep in mind that the indicator is not for trading choppy, ranging markets.

The single crossing is your signal to enter a trade, after the closing candle is registered below the Green line. When the Green line flattens or crosses again, it is time to exit. A Bollinger Band® is a momentum indicator used in technical analysis that depicts two standard deviations above and below a simple moving average. Williams believed that individuals and institutions tend to collect most of their profits during strongly trending periods. He called the Moving Averages Balance Lines and said that if all the moving averages are intertwined, then the Alligator sleeps, and the longer he sleeps, the more hungry he becomes.

Price Rate Of Change Indicator – Definition, Formula and the ROC Trading Strategies

For example, Parabolic SAR. It’ll help you avoid fake signals that often appear in times of the sideways market. We can notice the formation of a trend when the fastest moving average crosses the other two lines. The strength of the trend will reflect the length of the sideways movement. The bigger the distance between the lines, the stronger the trend is. Alligator’s Lips is the fastest moving average among the three.

When the alligator is sleeping, it suggests an absence of a trend, causing the asset to trade within a tight trading range. However, this doesn’t mean an eager trader cannot take a position. A scalping strategy buying and selling the support and resistance within the range can be extremely effective. The range is considered broken and a trend forming once a few consecutive candles close outside of the range and the alligator begins to feast again. Depending on which way these move, cross, or act as support or resistance, can provide traders with valuable signals to take action from.

The candlestick, on which the Signal Fractal was formed, should not touch the Alligator indicator lines. 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. The trade is moved to the breakeven, according to this strategy, when the Jaw line is below the entry price for a sell trade and above the entry price for a buy trade. This is the level of the previous bar local highs which shows the past performance of the asset’s trading dimensions. The target of an uptrend is to break through the important high.

The trend has formed with a clear direction

If both alligator indicator are green you have a trading signal, because that means that the „alligator“ has awakened and the trend starts. The 5 period moving average is the green line in the example and is called the alligators lips. The 8 period moving average is the red line and is called the alligators teeth.

Moreover, we see a long tail on the Delta indicator which means that a buyer has entered the market. It is reasonable to expect a bounce off 1770 level under these conditions. Unfortunately, the Alligator indicator is not able to capture these important nuances for analysis.

Divergence Indicator in Forex Trading

It depends on the timeframe where you use the Alligator in a trading platform. If you trade in long timeframes (H4 – D1), the signal period will last from one week to one month. When you trade on a one-hour chart, the period ranges from one to four days.

This has allowed less time in front of the computer without an adverse affect on returns. 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 Awesome Oscillator is another indicator developed by Mr Williams.
• The indicator alternates between signals of awakening and sleeping, which informs traders about trend breakouts.
• The function na() returns true if it doesn‘t have data for datapoint smma.
• 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.

By combining the indicator with the MACD, you reduce the chances of a false breakout. As such, in this case, the Williams Alligator will help you identify exit areas. When a financial asset’s price is rising, the bullish trend will remain intact so long as it is on the left side of the indicator. Other types of moving averages are simple, exponential, and weighted. The Alligator indicator is one of the several indicators that were developed by Bill Williams.