The fractal must be above or below the Alligator teeth, depending on the trade direction. You can think that the Alligator is a complete trading strategy, but it is not so. You need additional https://forex-world.net/ filters to detail the entry and exit points. For example, you can employ oscillators or other trading tools, such as Fractals or Price Action patterns, volume indicators, and so on.

When the green and red lines above cross the blue line, it is regarded as a sell signal, and vice-versa. Note the two downtrend occurrences of this crossing signal, each preceding a downward fall in price behavior. The Alligator is shifted forward to anticipate a change in direction and visually appears a few bars beyond current price movements. The confirmations from the CCI, in these examples, occur in the current time period. If you think the alligator indicator is signalling an uptrend, you can open a ‘buy’ position (go long). If you think the indicator is suggesting a downtrend, you can open a ‘sell’ position (go short), which enables you to profit from falling FX prices.

Commodity Channel Index (CCI) Indicator

It is often required to use additional filters for trading signals. Without filters, it could send many false signals and there is a high risk of causing many losses. You need to adjust settings for each trading style and timeframe individually. A significant flaw is that you need to adjust the Alligator technical indicator parameters for each timeframe individually. However, with this approach, there will be a lot of signals in short timeframes, half of which will be false.

The indicator looks for convergence/divergence in order to build signals. The Jaw (blue) makes slower turns than the others, while the Lips (green) will be the fastest moving average in the indicator. Because of this, the triple indicators are used very similar to a three moving average server system. For example, if the green indicator slices through the other two to the downside, it’s a sell signal. On other hand, if the green indicator slices through the other two to the upside, that’s a bullish sign and a potential buy signal.

Alligator settings for H1 timeframe and shorter

Different Alligator indicator settings apply to trading in different timeframes. I should note that the longer is the timeframe, the more reliable are the signals generated. And vice versa, the shorter is the timeframe, the more there will be signals, but a false buy or sell signal will be more often to occure.

• A stop loss is set above the high of the most recent upward fractal.
• Research led the trader to the conclusion that the market is chaos and trading is a psychological game.
• This will plot a green (5) moving average, a red (8) moving average, and a blue (13) moving average.
• In long timeframes, on the contrary, there will be fewer signals, and you will have to wait for entry signals for a long time.
• That is why it is advisable to always make use of the Alligator indicator in combination with another technical indicator like MACD to filter out false signals.

The jaw line is at the top, below is the teeth line, and the lip line is the lowest. As the downtrend develops, the distance between the balance lines is increasing. Next, the lip line is the https://investmentsanalysis.info/ first to react, as it is the fastest. Next, the teeth line reacts, and the jaw line is the last to react. It works in a similar way as an Alligator opens the mouth to capture the prey.

Williams Alligator Indicator

The downtrend does not last long, and the balance lines join and cross each other in the opposite direction. Here, the Alligator doesn’t rest and right away starts hunting. The last buy signal appears on the right side of the chart, immediately after the sales are closed which is the last chance for investment business. The Alligator Forex trading indicator is composed of three moving averages, which are called the three balance lines and are the jaws, teeth, and Alligator’s lips.

In the second stage, the alligator opens its mouth and grabs the victim, eats food. Research led the trader to the conclusion that the market is chaos and trading is a psychological game. Knowing the psychology and understanding the principles of behavior of market participants, https://day-trading.info/ the zones of accumulation and the price’s exit points from these zones are determined. Traders employ the Williams Alligator to open both medium-term and long-term positions in the daily or weekly timeframes and the positions during the day or week in the shorter timeframes.

How to start trading

Thus, be careful when configuring the TEMA as the volatility and the time frame should also be taken into consideration. The tighter your TEMA, the more fake signals you will encounter on the chart. The signs of a sleeping Alligator are when the three lines are close to each other. This of course translates to low volatility and trading should be avoided during these lull periods.

The lip line should break through the teeth line upside, and the teeth line should cross the jaw line from bottom to top. 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. After the Alligator is full, the market calms down, the balance lines join after they lose direction and begin to intertwine with each other. The market needs a break, and the Alligator falls asleep at that moment.

In this strategy, the major tools are the Bill Williams indicators, the Alligator, and others, for example, Awesome Oscillator, Fractals. 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.

• When the Jaw, the Teeth, and the Lips are intertwined, it means the Alligator is asleep and there’s no uptrend or downtrend at the market.
• 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.
• No representation or warranty is given as to the accuracy or completeness of this information.
• Bill Williams suggested that when the downward cross occurred, it was when the alligator was sleeping, while an upward cross is the alligator awakening.

The Alligator forex indicator is a respected tool in the forex trader’s toolbox. It is a standard offering in most every trading platform, including MetaTrader 4 (MT4) and others proprietary systems, as well. It consists of three lines, overlaid on a pricing chart, that represent the jaw, the teeth and the lips of the beast, and was created to help the trader confirm the presence of a trend and its direction. The three lines stretched apart and moving higher or lower denote trending periods in which long or short positions should be maintained and managed.