How to get spot trending moves using Alligator indicator? by Elearnmarkets. October 25, Reading Time: 4 mins read. Share on Facebook Share on Twitter Share on WhatsApp. The alligator indicator developed by Bill Williams consists of three smoothed moving averages which help in identifying a trend and its direction. The three lines are simply placed on the price chart which represents the jaw blue line , the teeth red line and lips green line of the alligator.

When three lines are twisted together, it is implied that the beast is sleeping and its mouth is closed. Table of Contents Alligator Indicator Formula Trading signal in Multiple Time frame Bottomline In a perfect uptrend, you will find green greater than the red and redline greater than the blue line.

This is the ideal scenario for uptrend or downtrend. Also read : 5 important uses of RSI But as you know that price does not move in a straight line but moves in a series of peaks and troughs.

Share Tweet Send. Elearnmarkets Elearnmarkets ELM is a complete financial market portal where the market experts have taken the onus to spread financial education. Related Posts. Technical Analysis. Trading with Volume Profile September 1, Understanding Volume Weighted Average Price VWAP Indicator August 25, Understanding Chaikin Money Flow Indicator August 18, Best 25 Technical Indicators that Every Trader Should Know September 1, Comments 5 abhi says:. Krishna Kishore Reddy Arumalla says:.

Thank you. Sakshi Agarwal says:. Hi Krishna, This strategy is already explained in the blog itself. Thank you for Reading! Keep Reading! riya says:. Hi, Thank you for reading our blog!! Leave a Reply Cancel reply Your email address will not be published. Follow Us.

Facebook-f Twitter Instagram Linkedin-in Youtube Telegram. Download App. Register on Elearnmarkets. com Register Free Account. Get Articles On Email. Enter your email address:. Basic Finance Derivatives Financial Planning Fundamental Analysis Technical Analysis Marketshala Miscellaneous.

Get Elearnmarkets App. Article Categories Basic Finance Derivatives Financial Planning Fundamental Analysis Technical Analysis Marketshala Miscellaneous Language Hindi Bengali English Courses Webinars.

Welcome Back! Login to your account below. This is a bearish sign in a bullish trend. In short, trading with the Alligator indicator is easy. Stay long when the price is above it, and short when it is below.

The perfect order is a plus. The perfect order is just one Alligator indicator strategy. It mainly deals with spotting the right trend. And sticking to it. However, Bill Williams designed it for other purposes too. Keep in mind that it shifts the averages further in time. This shifting allows for greater flexibility. In a way, it resembles the Ichimoku Cloud.

That is, on the right side of the chart, obviously! Therefore, future support and resistance levels appear at present time. With the cloud, the price is in a state of equilibrium. It finds a balance between historical and future levels. These shift backward and forward twenty-six periods.

Hence, shifting is not a new concept. Bill Williams sensed its power and used it with the Alligator indicator. A wonderful Alligator indicator trading system deals with support and resistance levels. Moreover, levels are NOT horizontal. You see, traders sometimes make a fatal mistake.

They believe support and resistance can only be horizontal. How about dynamic levels? As a rule of thumb, dynamic support and resistance move along with the price. Therefore, they offer more value. The three lines that make the Alligator Forex indicator jaws, teeth, and lips do exactly that. They follow the price. If the price rises, the three lines follow. If the price falls, they fall too. The bigger the distance between the lines, the stronger the support and resistance area.

The bigger the time frame, the more difficult for the price to break through. In this way, the area between the first line the green one — lips and the last one the blue one — jaws is dynamic support or resistance. For example, in a bullish trend, it shows support. Note the Alligator indicator MT4 support on it. It starts from the green line and ends with the blue line. The lips offer weak support.

If bears push stronger, they might reach the teeth. Jaws represent the final support. Trading is fun if a logical approach governs it. Decisions to buy or sell should come at support or resistance. For this reason, the Alligator indicator formula is a great tool for traders.

In fact, they go hand in hand. First, one needs to look for a reversal pattern. This can be a double top or bottom, a head and shoulders pattern or a triangle. Or, it can be one of the Japanese candlestick techniques. The Japanese were masters in spotting reversals. As such, most of their techniques deal with trend reversal approaches. Use the Alligator indicator Forex platforms provide as confirmation.

What is the confirmation then? The result is one of the best approaches of how to use the Alligator indicator in Forex. Especially relevant is this system when used with a Japanese candlestick pattern technique.

Moreover, a morning star is perhaps the most powerful bullish reversal pattern ever! Confirmation protects a trading account. The Alligator Forex indicator is the perfect tool for that. Probably as important as the reversal pattern is its confirmation. Without it, traders end up going long, in this case, only to find out that the market comes for their stop. Another great Alligator Forex trading system consists of interpreting the crosses. That means, the crosses between the three lines that make the indicator.

How about spotting the fake ones? A typical approach is to use the faster average the green line for spotting fake crosses. Therefore, eyes on the green and red lines, please! When the green line crosses the red one and then turns again without reaching the blue line, a fake move just forms. Hence, in a bullish trend, go long on such a cross.

Or, in a bearish trend , go short when the perfect order gets back in place. Keep things simple and logical and profits will come to you. One example of a bearish cross in the chart above shows plenty of further downside potential. The fake cross was nothing but an opportunity to use what the Alligator Forex platforms offer. And there are more of them. A similar fake cross is possible between the bigger averages: the blue and the red lines. In fact, such a cross is more powerful.

It is only normal, as the two lines consider more periods before plotting an actual value. The time frame matters here too. Not for the actual cross, but for setting the right take-profit level. When a signal as described here appears, consider the time frame before setting the take-profit level. Do that if the signal comes from the daily chart, for example. This way, you adjust your expectations with the time frame used.

It calls for two big moving averages crossing. When the fast one moves above the slow one, a golden cross forms. This is bullish. When a death cross appears, the opposite is true.

Bears are in control. This Alligator indicator trading system offers a similar interpretation. The secret is to use the bigger averages in the same way. Therefore, use the red and blue lines as the faster and slower averages. Just like in the case of a golden or death cross. A cross like this shows you the type of the market: bullish or bearish.

Of course, in a bullish market, we want to buy. In a bearish market, shorting a Forex pair works best. Furthermore, use the green line of the Alligator indicator as a confirmation.

If not, think twice. The opposite is true when a death cross forms. One bearish and one bullish. Both are great signals to take with the Forex Alligator indicator. Again, simple things work best in technical analysis. Just like a displaced moving average shifts on the right side of a chart, the Alligator indicator does that too.

This is a powerful tool in the hands of Forex traders. Stop for a minute and think of how this indicator functions.

The Alligator indicator is a great Forex trading tool that has been fascinating traders for a long time. While not a moving average , riding trends is its main quality. This article shows how to use the Alligator indicator in Forex in a profitable trading way.

Although it has a funny name, the indicator shows the power of bulls or bears to reverse a trend. For this reason, the indicator is popular among Forex traders, trend followers or contrarians. Together with Fractal, Gator or the Awesome oscillator, the Alligator Forex strategy is unique in every way. It is part of a special group of indicators. Trading platforms, MetaTrader included, offer the Bill Williams indicators separate from classical trend indicators or oscillators.

All traders face a dilemma: to use trend indicators or oscillators for their analysis? However, one can use both.

Regardless of whether it is part of an individual trading system or not, the Alligator indicator shows the right side of the market. Traders use it to find a bullish or bearish market, support or resistance levels, confluence areas, etc. The indicator has a funny name: it comes from the head of an alligator.

As part of it, there are three averages. A trading system based on moving averages plots multiple averages on a chart. The same here. Any Forex Alligator strategy contains three averages, with the above names. Any average has a period that it relates to. For the Alligator, these are the 13, 8 and 5 periods for jaws, teeth, and lips, respectively.

All three averages combine the power of the Alligator indicator. One can choose the average type smoothed, simple, exponential, linear weighted and the price to apply it to. When either closing or opening price, a median one or not, multiple settings exist.

What makes this indicator unique is the ability to shift the averages. In fact, with the default settings, the averages shift, leaving a bit of room from the current price until the Alligator Forex indicator. We will use the MetaTrader trading platform to show how to apply it on a chart.

However, any trading platform offers it, so the principle is the same. The result is a pop-up window like the one above giving you customized possibilities. To use it like Bill Williams intended, just leave it with the default settings. Anything is editable, though: colors, levels, etc. The three averages plotted on the chart reflect the time frame you use.

If the Williams Alligator indicator is set on the daily chart, the jaws consider 13 days, teeth 8 and lips 5, respectively. For that, the following information is crucial. When using it, think of a system that follows price. No matter where the price goes, the Alligator goes. These averages closely follow price and keep traders on the trend. Because of that, missing a trend is virtually impossible. The three elements should NOT cross. When doing that, the perfect order forms. Moreover, this signals a strong trend.

The bigger the time frame, the stronger the trend. What can go wrong? Firstly, the price moves aggressively below the green line lips. This is not scary if it is the first attempt. The more the price tries, the weaker the trend becomes.

In a bullish trend, it shows bulls lose steam. Also, they might become wannabe bears. Trading with the Forex Alligator indicator gives two choices: follow the trend and spot the reversal. Secondly, look for the perfect order to break. This is a bearish sign in a bullish trend. In short, trading with the Alligator indicator is easy.

Stay long when the price is above it, and short when it is below. The perfect order is a plus. The perfect order is just one Alligator indicator strategy. It mainly deals with spotting the right trend. And sticking to it. However, Bill Williams designed it for other purposes too. Keep in mind that it shifts the averages further in time. This shifting allows for greater flexibility. In a way, it resembles the Ichimoku Cloud. That is, on the right side of the chart, obviously!

Therefore, future support and resistance levels appear at present time. With the cloud, the price is in a state of equilibrium. It finds a balance between historical and future levels.

These shift backward and forward twenty-six periods. Hence, shifting is not a new concept. Bill Williams sensed its power and used it with the Alligator indicator. A wonderful Alligator indicator trading system deals with support and resistance levels.

Moreover, levels are NOT horizontal. You see, traders sometimes make a fatal mistake. They believe support and resistance can only be horizontal. How about dynamic levels? As a rule of thumb, dynamic support and resistance move along with the price. Therefore, they offer more value. The three lines that make the Alligator Forex indicator jaws, teeth, and lips do exactly that. They follow the price. If the price rises, the three lines follow.

If the price falls, they fall too. The bigger the distance between the lines, the stronger the support and resistance area. The bigger the time frame, the more difficult for the price to break through. In this way, the area between the first line the green one — lips and the last one the blue one — jaws is dynamic support or resistance. For example, in a bullish trend, it shows support. Note the Alligator indicator MT4 support on it. It starts from the green line and ends with the blue line.

The lips offer weak support. If bears push stronger, they might reach the teeth. Jaws represent the final support.

Trading is fun if a logical approach governs it. Decisions to buy or sell should come at support or resistance. For this reason, the Alligator indicator formula is a great tool for traders. In fact, they go hand in hand.

First, one needs to look for a reversal pattern. This can be a double top or bottom, a head and shoulders pattern or a triangle. Or, it can be one of the Japanese candlestick techniques. The Japanese were masters in spotting reversals. As such, most of their techniques deal with trend reversal approaches. Use the Alligator indicator Forex platforms provide as confirmation. What is the confirmation then? The result is one of the best approaches of how to use the Alligator indicator in Forex.

Especially relevant is this system when used with a Japanese candlestick pattern technique.

As stated earlier, the alligator indicator strategy can identify range markets. Also read : 5 important uses of RSI. The same here. You can use the Williams Alligator indicator to find the absence of a trend. How to Use Exponential Moving Average With Formula An exponential moving average EMA is a type of moving average that places a greater weight and significance on the most recent data points.

Categories:

• Binary Options
• Binary Options online
• Forex Brokers
• Forex Bitcoin
• Forex