Here you can see obvious pullbacks that have pulled to the green and red line while the blue kept the upwards slope. You want to see all lines pointed in the same direction, in order. “Displaced” means that the reading is adjusted X bars into the future which is believed to better forecasts future trend direction. Fundamental analysis is one of the methods of predicting the market value of stocks and other assets, based on data analysis. This article will help you learn the type, methodology, and examples of FA.
This is available also on the MT4 trading platform which is widely used. The ranging markets depicted by the sleeping Alligator suggests periods where traders can stay away from the markets and avoid taking undue risk. After designing numerous trading indicators, Williams created the alligator indicator which reflects this same philosophy.
According to Williams, during that situation, the alligator is still sleeping and is yet to awaken. This suggests that traders need to wait for other confirmation. They Tradeallcrypto Broker Review: Your Decent Forex Broker should also wait for the price to reflect the trend change signaled by the indicator. This means that traders are always looking for means to apply various indicators.
As for other indicators, not included in the Profitunity system, trades use standard oscillators, RSI and Stochastic, as signal filters. We can therefore say that a crossover of the green line to the upside indicates a buy signal while a crossover to the downside indicates a sell signal. The teeth are set up with the 8-bar SMMA and are smoothed by 5-bars on subsequent values. I use yahoo fiancé and i try to figure out stuff, and some i follow, but the alligator i couldn’t figure out, so i deleted it.
A significant flaw is that you need to adjust the Alligator 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. In long timeframes, on the contrary, there will be fewer signals, and you will have to wait for entry signals for a long time. When the price hits the highest high in the chart, the price enters a consolidation range. The green line crosses the red one, and the red line crosses the blue one.
When the alligator lines start to cross back lower, you could take any profits you made from the move higher. As the alligator lines move distinctly higher or lower, you could start looking for new trades. When the indicator forms two highs above the zero level and the trough between them doesn’t plunge below 0, the signal is bearish. The second high must be lower than the first one and be followed by a bearish bar.
Example of the Williams Alligator Indicator
The built-in implementation of the alligator is incorrect. It uses SMA with altered input parameters to approximate the true alligator indicator. The alligator was created with a supercomputer to model the elliott wave – it’s very apart from other MA techniques.
This line is used to add up to the opened positions in the trend if there is strong momentum in the chart. The Williams Alligator analyzes stock indexes, equities, commodity and precious metal markets, Forex, and cryptocurrency markets. It is a technical indicator based on the moving averages with different periods. However, the Alligator alone is not enough to find out good entry points. Bill Williams himself applied Alligator together with other technical indicators he developed. He developed the Profitunity trading system based on the combination of the technical indicators created by Williams.
Setting Stop Loss on the indicator lines
These lines imitate the process of an alligator’s hunting. The lines are moving averages with different periods and shift to the future. Other indicators, included in the Profitunity system serve to filter signals and to detail the entry and exit points in the overbought and oversold markets. Thus, Bill Williams developed an independent trading system and started to teach traders to use it. The “Trading Chaos” is still popular and has many followers, and the Williams indicators are still popular.
- A BUY signal comes when the price breaks all moving averages and closes above them.
- The Alligator indicator can be used in any market or time frame.
- This is one of the few indicators that employs a triple moving average in-built strategy.
- They also observe for a close of a candle through the lines of the indicator before taking action.
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. Right after the Alligator sleeps, you can see that it wakes up. This is seen by the three smoothed moving averages diverging.
Alligator indicator conclusion
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If the price breaks this line, it usually means that the trend is turning in the opposite direction. It is used to spot the entry points in slow trends or in conservative trading strategies when traders prefer to trade only in the strongest levels/zones. Alligator is composed of three smoothed lines, which Williams called lips, teeth, and jaws.
The jaw is the 13-period smoothed moving average that is shifted into the future by 8 bars. The lips line is the smoothed moving average with the default period of 5, moved by 4 bars into the future. However, it has the fastest reaction to the price changes. This moving average is the first to react to changes in the balance of power of buyers and sellers in the market.
The Alligator strategy on the Forex and stock market is a classic trend trading indicator used by many traders for many years. Bill Williams worked with this tool in the stock market, but the practice has proven that Alligator is applicable to other markets. If you do decide to trade on lower timeframes, you may enter a filter in the form of a long term moving average with a period of 233. If the chart is above this MA, you could give priority to buy trades, if below this MA, you may look for sell trades. The Alligator falls asleep – the hunt is over; the predator is full.
These include the MACD, RSI, or any of your other favorite indicators. Bill Williams used pure imagination to explain the indicator. It’s enough of a fast glance Renesource Capital Review at the indicator to understand what is happening in the market. A bullish fractal has a middle candlestick with the lowest low, among other candlesticks.
How does an Alligator work?
At the far right of the chart, the Alligator is opening its mouth again, or awakening, signaling a downtrend. The Alligator indicator uses three smoothed moving averages, set at five, eight, and 13 periods, which are all Fibonacci numbers. The initial smoothed average is calculated with a simple moving average, adding additional smoothed averages that slow down indicator turns.
The breakout of the counter-trendline after a pullback to the Alligator lines may be a sign of trend resumption. One common momentum oscillator that is usually combined with the Alligator is the accelerator oscillator — another indicator developed by Bill Williams. A ranging market is one in which the price swings up and down without making a significant displacement to the upside or downside — the market simply moves sideways.
Many traders will enter the market following a candle close above/below all 3 lines at this point. From those states, a trader can determine if they will use a range trading strategy, a trend trading strategy, or wait for a breakout strategy to be used. A Bollinger Band® is a momentum indicator used in technical analysis that depicts two standard deviations above and below a simple moving average.
You can choose the colors and the thickness of the lines as you want. The most important is that it is comfortable for you to analyze the chart, and the indicator doesn’t prevent you from seeing bars. On the new trading day of January 20, the market closes at the price rise.
If the price consolidates above the jaws blue line and continues to move in a new direction, the Alligator lines will begin to rebuild and indicate a new direction for trading. It is clear from the chart, the has been trading in a downtrend up to now. All the attempts to drive the price up have been absorbed. When the price was above the Alligator lines, the lines themselves didn’t change their direction. That is, it has been relevant to sell gold up to now.
What is the Alligator Indicator?
When the green line starts to cross, the alligator is getting hungry and ready to eat – this is when you should search for a trading opportunity. After that, the red UFX Forex Broker Review line starts separating and moves in the same direction. When the green and red line pull away from the blue line, Alligator opens its mouth and starts eating.