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Bill Williams Alligator

What is Alligator Indicator

Bill Williams Alligator Indicator is an on-chart technical analysis tool that signals a trend absence, formation, and direction. It consists of 3 smoothed moving averages set at 13, 8, and 5 periods and shifted forward 8, 5, and 3 bars respectively.

But why does Bill Williams compare the created indicator with a beast? Bill Williams used the alligator analogy to describe the way markets move from non-trending to trending and vice versa.

Williams Alligator Indicator
Bill Williams
Bill Williams
American trader and author of books on trading psychology.
Bill Williams invented many indicators and gave them unique and catchy names, such as Awesome Oscillator, Gator Indicator, Alligator Indicator.
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How to Use Alligator Indicator

The Alligator indicator consists of three smoothed moving averages:
  1. The Alligator’s jaw or the blue line is a 13-period smoothed moving average shifted into the future by 8 bars;
  2. The Alligator’s teeth or the red line is an 8-period smoothed moving average shifted into the future by 5 bars;
  3. The Alligator’s lips or the green line is a 5-period smoothed moving average shifted into the future by 3 bars.

How to Use Alligator Indicator

The Alligator is resting when the three averages are twisted together progressing in a narrow range. The more distant the averages become, the sooner the price move will happen.

The averages continuing in an upward direction (green followed by red and blue) suggest an emerging uptrend which we interpret as a signal to buy.

The averages following each other in the reversed order down the slope are a strong signal of an unfolding downtrend so selling at this point would be more than appropriate.

Alligator Indicator Formula (Calculation)

The moving average of the Alligator indicator is calculated by using the average price of the bar (candle). The blue line is calculated with a 13-period moving average shifted forward by 8 bars, the red line – with an 8-moving average shifted forward by 5 bars and the green line is calculated with a 5-period moving average shifted forward by 3 bars.

Alligator Indicator Formula

Trading signals with a probability of 80% by Autochartist

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Some key points about the Alligator Indicator:

  • Williams Alligator is composed of 3 lines, so it provides more and stronger trading signals based on more data than many other one-line indicators.
  • 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.
  • To build trading signals, the Alligator Indicator uses convergence divergence ratios.
  • The indicator is good at recognizing trends, their direction, timing to enter the trade, though it is almost useless during high volatility and trend absence.
  • Usually, traders use one or two other indicators (MACD, TEMA, RSI, Stochastic, etc.) along with the Alligator Indicator to confirm the Buy or Sell signals.
  • Before starting real trading on our terminals with the technical support of the Alligator Indicator and to recognize it more deeply and carefully, you can try demo-trading in a risk-free trading environment.

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Forex Indicators FAQ

What is a Forex Indicator?

Forex technical analysis indicators are regularly used by traders to predict price movements in the Foreign Exchange market and thus increase the likelihood of making money in the Forex market. Forex indicators actually take into account the price and volume of a particular trading instrument for further market forecasting.

What are the Best Technical Indicators?

Technical analysis, which is often included in various trading strategies, cannot be considered separately from technical indicators. Some indicators are rarely used, while others are almost irreplaceable for many traders. We highlighted 5 the most popular technical analysis indicators: Moving average (MA), Exponential moving average (EMA), Stochastic oscillator, Bollinger bands, Moving average convergence divergence (MACD).

How to Use Technical Indicators?

Trading strategies usually require multiple technical analysis indicators to increase forecast accuracy. Lagging technical indicators show past trends, while leading indicators predict upcoming moves. When selecting trading indicators, also consider different types of charting tools, such as volume, momentum, volatility and trend indicators.

Do Indicators Work in Forex?

There are 2 types of indicators: lagging and leading. Lagging indicators base on past movements and market reversals, and are more effective when markets are trending strongly. Leading indicators try to predict the price moves and reversals in the future, they are used commonly in range trading, and since they produce many false signals, they are not suitable for trend trading.

Use indicators after downloading one of the trading platforms, offered by IFC Markets.

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