You can try trading with the Alligator indicator on the demo account without registration. Listed below, there are primary advantages and disadvantages of the Alligator, for you to decide if the Alligator trading strategy suits you or not. In this case, you should look for an entry in the opposite direction. There is no point in holding the trade even if the Stop Loss is set beyond the blue. Expect when the hourly candlestick breaks through the most recent downward fractal and closes below. You wait for the moment when the hourly candlestick breaks through the last formed upward fractal and closes above the high.
IC Markets are my top choice as I find they have tight spreads, low commission fees, quick execution speeds and excellent customer support. A bullish fractal has a middle candlestick with the lowest low, among other candlesticks. The Williams fractal indicator puts an arrow above the alligator indicator trading system middle or third candlestick that has two candlesticks on the right and two candlesticks on the left. In the blue rectangle, the Alligator is sleeping and we should not open any positions. These are the Alligator indicator default parameters offered in the LiteFinance client profile.
- The downtrend does not last long, and the balance lines join and cross each other in the opposite direction.
- Williams also developed a “Gator” histogram indicator to help visually with its interpretation and provide another means of validation.
- The first type of trading with the Bill Williams’ Alligator indicator suggests you don’t use any additional trading tools.
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 line https://1investing.in/ (teeth) 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.
Alligator indicator conclusion
Some traders at this point will close their positions if they’ve made a profit, as the uptrend or downtrend may have come to a standstill i.e. the market is becoming range bound. The Alligator indicator, also known as the Williams Alligator indicator, is a technical analysis tool developed by Bill Williams. It consists of three moving average lines that converge or diverge according to the state of the trend. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. 70% of retail client accounts lose money when trading CFDs, with this investment provider. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
In the other scenario, if the lips value is lower than the teeth and jaws value, it will be a sell signal. Bill Williams refers to these moving averages as “balance lines”. You can see that he also gave creative names to the indicator and its elements. His idea was to provide an example that will demonstrate the behavior of the market. This example is the alligator that alternates between the periods of sleep and hunting.
The more times the price breaks the green line, the weaker the trend. The course of the moving averages simply identifies the trend direction. If they move down and widen even more, it’s a strong downtrend signal. 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.
If the lips line is lower than the teeth and the jaws then the closing price is greater than the teeth value, it will be a buy signal. In the other case, if the lips line is greater than the teeth and the jaws then the closing price is lower than the teeth value, it will be a sell signal. Fractals are labeled by Dr. Williams as the first dimension of his technical analysis system. Fractals are essentially short-term support and resistance levels in the price chart, and these are the fundamental building blocks of the Alligator Trading System.
When you see the lines going in a certain direction, you can introduce a price pattern that’s commonly used by many traders – a pullback. To support your theory, you should have all lines pointed in a single direction. You can define the length of pullback by selecting where the price should pull back to. This is a common state of the market that is observed when the three lines of the Alligator indicator move close to each other or are intertwined. In other words, the Alligator is sleeping and waiting for alterations in market conditions.
Using Alligator’s lines
If an Up Fractal form above the Alligator’s Teeth, only then it should be considered valid. By contrast, if the Down Fractal forms below the Alligator’s Teeth, then you can consider it to be valid. However, keep in mind that any Up Fractal that formed below the Alligator’s Teeth is not valid and vice-versa. Stay on top of upcoming market-moving events with our customisable economic calendar.
Understanding the Williams Alligator Indicator
Why should you move the order to the breakeven zone in this case? It is because the Jaw line is responsible for the trend border in the timeframe you trade. A stop loss is set above the high of the most recent upward fractal. You can download the Alligator momentum indicator for the MetaTrader on the MetaQuotes official website. Risking 1% of the initial deposit, we can afford to enter a trade of 0.45 lots.
For a fully developed downtrend, the green line is below the red line, which, in turn, stays below the blue line. 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 clicking on Alligator, a dialogue box with the default setting will appear.
Earlier, we stated that the indicator signals the trend strength. Let us remind you that the more frequently the price touches the fastest moving average (green line), the sooner the trend will end. As a result, the most common mistake is that traders close the position earlier than they should. Wait until the Alligator wakes up and all its lines arrange in a particular direction. The lip line should be above the teeth line in the uptrend and below – in the downtrend. Likewise, the teeth line should be above (below) the jaw line correspondingly.
One of the indicator’s drawbacks is the time lag, which is a common pitfall of all the indicators. You’ll likely see the fake cross much later than the price continues moving within the current trend. You can detect the power of the indicator not only by the spread between the moving averages but the price interaction. If the price goes beyond the green line for short periods, it’s a signal that the trend will soon end.
You can also trade with the default parameters, but, in this case, you should trade in longer timeframes from H4 to D1. Applying the alligator indicator helps you trade along with strong trends. It is one of the best visual tools available in the market that recognises vital entry points. Start trading with Blueberry Markets, a global forex trading platform, to use this indicator, along with several others. Sign up for a live trading account or try a risk-free demo account.
What is the Williams alligator indicator?
If the Alligator is not asleep, the market is either in an uptrend or a downtrend. Once you have mastered how to use the Fractals in combination with the directional trend identified by the Alligator indicator, you can move on to learn the complete Alligator Trading System. According to the Alligator Trading System, just because an up or a down Fractal is formed, it does not mean that these are valid signals! You have to interpret the Fractal in relation to the Alligator indicator and pay attention to the Alligator’s Teeth, which is the red line in the middle. However, to get the first signal, you need to have a thorough understanding of how the Fractal indicator works. Depending on the trading goals and the most comfortable trading style for the trader, different averages will be of key importance for entering the market and placing Take Profit/Stop Loss orders.
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73.77% of retail investor accounts lose money when trading CFDs with this provider. This of course also leads to further lagging in the trading signals. Thus, be careful when configuring the TEMA as the volatility and the time frame should also be taken into consideration.