The Kairi Relative Index is a technical analysis indicator used to indicate potential buy and sell points based on overbought or oversold conditions. How the indicator is calculated is important for understanding the inner workings of the indicator. The Alligator indicator can be added to your charts from the indicator list in your charting or trading platform. When the Alligator is feeding, watch for pullbacks against the main trend direction and trade those moves with a pullback strategy.

You know how to implement the indicator on the chart and read its signals, but it’s worth noting one strategy that will bring you potential profit. One of the most important parts of trading is to find the perfect entry. If you don’t have much experience in trading with the Alligator indicator, you may have some difficulties. When the Alligator is sleeping , there are frequent crossovers that look like a signal.

It provides signals when a new trend is in motion and also tells you when there is no trend. Other signs you may notice are the red and blue lines starting to chase the lip. At this time, the price is already ahead in the direction of the potential new trend, and you may want to enter a trade in that direction. When the alligator is sleeping, the mouth is closed, with the lips, teeth, and jaws coming close together.

alligator indicator

When it is calculated, it does not refer to a fixed period but takes all available data into account. You calculate this by subtracting the previous SMA from today’s price. The three lines stretched apart and moving higher or lower denote trending periods in which long or short positions should be maintained and managed. You must keep in mind that since we are using displaced moving averages, each of the 3 lines will be plotted ahead of price by the factor of the displacement – 3, 5, and 8 periods. The balance lines can provide resistance/support during the trend phase.

According to Williams, the alligator is “sleeping” at this time. 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. Candlestick Cross and CloseNote the the green line has crossed over the red to the downside. Remember, these lines are displaced into the future and would have plotted in front of the candlestick we are shorting.

The green line crossing the other two moving averages and chasing the price is one of the indications that the Alligator is waking up and getting ready to feed. When a new trend is about to begin, the green line is the first line to move in the direction of the trend because it is the fastest of the three moving averages. So, when the three moving averages in the indicator are intertwined, the market is said to be sleeping. Of course, the longer the beast sleeps, the hungrier it will be when it wakes up. The 5-period moving average is most sensitive to price movements and is the first to move in the new direction of the price, followed by the 8-period, and then, the 13-period.

Stay on top of upcoming market-moving events with our customisable economic calendar. The indicator was developed by American author Bill Williams, who first wrote about it in 1995. The Dow Theory states that the market is trending upward if one of its averages advances and is accompanied by a similar advance in the other average. Gordon Scott has been an active investor and technical analyst or 20+ years.

Trading platforms

The Alligator strategy can accurately identify the market situation. Bill Williams’s inventions have made an outstanding what is a lexatrade forex broker contribution to modern trading. EneX is signal that give recommendation signals for entry and exit on spot market.

alligator indicator

If the Alligator is waking up, look for an entry point. If the Alligator is falling asleep, exit the trade before start losing money rapidly. Do not trade forex or other market when the Alligator is sleeping. You can apply the Alligator with the standard parameters of 13;8;5.

Williams Alligator Indicator

In a fully developed uptrend, the green line is above the red line, which, in turn, is above the blue line. As you can see, the indicator uses the principle of convergence and divergence of the moving averages. After feeding, the alligator goes back to sleep — that is, the moving averages converge again. After clicking on Alligator, a dialogue box with the default setting will appear. You can use the default settings or change whichever parameter you want. For example, ‘Apply to’ can be the close price or median price.

alligator indicator

There is no trend when the three moving averages are intertwined. At this period, the market is consolidating with low volatility or becoming very choppy, which is very difficult to trade. what is ifc markets When an alligator wakes up, it opens its mouth in search of food. This corresponds to the moving averages speeding away from each other, which happens when the price is trending.

Alligator and Fractals Trading Strategy

After all, that’s all this is but there are some tweaks to the calculations because they are smoothed. Deepen your knowledge of technical analysis indicators and hone your skills as a trader. Useful volume analysis indicators in the ATAS platform. They can improve your trading strategy by the classic Alligator indicator.

  • This entry turns out to be very successful because the price drops sharply.
  • IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority.
  • It means that you should look for an entry for selling and exclude buying.
  • The three moving averages make up the jaw, teeth, and lips of the Alligator, expanding and intertwining in reaction to changes in market trends.
  • Lips, Teeth, and Jaw of the Alligator show the interaction of different time periods.

The more times the price breaks the green line, the weaker the trend. The Alligator indicator helps differentiate between trending and resting periods. The indicator consists of three lines, overlaid on a price chart, that represent the jaw, the teeth and the lips of the alligator. It indicates that a trend is in effect and in what direction the trend is moving. The way the indicator works can be explained using the following analogy. When the alligator’s jaw, teeth, and lips are closed , it means it is tired or sleeping.

At this point, it truly comes down to your personal preference, and traders will use both methodologies when it comes to using the Bill Williams Alligator Indicator. The indicators are known as the jaw, the teeth, and the lips of the alligator. Although Williams describes this as an alligator, it’s essentially just three moving averages. It’s because of this that it should be relatively simple for most traders to start to use it almost immediately. It turns out that when trading with the Alligator, you take almost the entire trend movement.

This is an 8-period middle moving average that is shifted by five bars to the right. This is a 5-period fast moving average that is shifted by three bars to the right. If the price crosses MA line from below, it is a sign that it is time to buy; if it crosses from above, it is time to sell. The Alligator is an indicator that was developed by a famous trader Bill Williams.

Bill Williams: 3 lines of the Alligator Indicator

In this situation, a price crossover is a great way to get into the market in the direction of the trend. Conversely, in a downtrend, pullbacks move upward and usually end at resistance levels. Since the Alligator indicator can show when a trend is forming, you can use it to trade a breakout strategy. A breakout happens when the price closes beyond the boundary of a range, and it often marks the beginning of a trend. Now, it is time to look at how you can apply what you have learned in developing a suitable trading strategy.

What Is The Williams Alligator Indicator?

The Alligator indicator was invented to determine the state of the market. Alligator Indicator works for any asset in any market, such as foreign exchange, currency pair, etc. It generates entry points at the very beginning of the price trending movement. Lips, Teeth, and Jaw of the Alligator show the interaction of different time periods. Our gain and loss percentage calculator quickly tells you the percentage of your account balance that you have won or lost.

How much does trading cost?

As a result, all of Bill Williams’s 3 lines are either too close to each other or intertwined. As you can see, the pair had been trading sideways, and the indicator’s lines were crossing each other. Williams recommended staying out of the market in times of consolidation. The Alligator indicator is one of the basic trend indicators. Bill Williams believed that market players collect most of their profits during strong trends. The smoothed moving average is a type of MA that uses a longer period to compute.

It is also recommended to confirm the entry point using oscillators or other indicators like moving average convergence divergence. To adapt the technical analysis indicator to different timeframes and markets, you should adjust lexatrade review the parameters of the moving averages. You can also trade with the default parameters, but, in this case, you should trade in longer timeframes from H4 to D1. The Jaws blue lines display the border of the medium-term trend.

The trend direction is indicated by the movement of the balance lines. As the green line is first to react to changes, we expect it to make the first move, followed by the red line, and finally, the blue line which is the slowest line. When the green line crosses above the two lines to the upside, it indicates a buy signal.

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. Once you click Okay, the indicator then appears on the main price chart. There are three moving averages, which are set at 5, 8, and 13. To add the Alligator strategy to the MT4 chart, you need to select the “Insert” menu, click on the “Indicators” tab.


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