Bill Williams Alligator Williams Alligator Strategy Alligator Indicator Formula

An option that I didn’t discuss in the video is the potential of a wider trailing stop for longer runs. I like to focus on the breakouts of just a few points as they happen very, very often. The Awesome Oscillator is the very powerful indicator, which can help to define the true market movement direction.

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Bill Williams believed that market players collect most of their profits during strong trends. Now, if you’re a day trader and you like being in and out of your trades fast, don’t you worry we’ve got your back. Our favorite day trading strategy Day Trading Price Action- Simple Price Action Strategy can teach you how to profitably day trade any market. Also, read about the Forex Mentors and the best investment you can make. In the first stage, the Alligator is asleep and the three smoothed moving averages are at the same point. Taken together, the lines form the mouth of a hungry alligator.

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Red fractals identify a bullish uptrend, and orange fractals identify a bearish downtrend. Yes, this indicator is based on the moving averages as well. However, it’s one of the most reliable indicators in the forex market. Although the Alligator indicator is one of the most reliable ones, it may also provide fake signals. If the green line crosses the red line opposite to the existing trend and then gets back, it’s a fake cross.

Step #4: Wait for the Awesome Oscillator Histogram to Break Above the Zero Line Before Buying at the Current Market Price

The price breaks away from the nearest local fractal lying below all three Alligator lines. Well, lucky us, the calculation is not required in practice. The Alligator indicator can be added to your charts from the indicator list in your charting. In this case, the down fractal is usually a bullish sign while the up fractal is a bearish sign. This happens because the down fractal is usually followed by a bullish sign while an up fractal is usually bearish.

But, we still don’t have confirmation that the buyers have taken the lead, which brings us to the next step of the Bill Williams Awesome oscillator strategy. The calculation of the Alligator indicator is terrifying at first glance and at second too. Finally, this underlying and unseen structure can be discovered and altered.

Bill Williams Alligator

Below, you will find its brief description, the results of a backtest, a download link, and installation instructions. If price shows a potential bearish fractals pattern it could signal a move to the downside, and a bullish fractals pattern could indicate a move higher. Futures, foreign currency and options trading contains substantial hong kong dollar exchange rate risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading.

He also said that if you are buying below the zero line, you need to see three green bars in a row to buy the asset below that level. Alternatively, if you are looking to short a market but the Accelerator Oscillator is above the zero line, you need to see three consecutive red bars print before doing so. For example, if the Accelerator Oscillator is above the zero line and printing green bars, this suggests that it’s going to be easier for acceleration to continue going to the upside.

  • Still, traders should place buy orders when there are two consecutive green bars above the zero line.
  • Eating phase – The eating phase is when there are green bars on both sides of the oscillator.
  • The trend reversed on the right when the blue line traded above the red and green lines which indicated bearish momentum.
  • The three moving averages comprise the Jaw, Teeth, and Lips of the Alligator.
  • The indicator is now mostly used for support/resistance levels and reversal trading.

Swing high is a technical analysis term that refers to price or indicator peak. Swing highs are analyzed to show trend direction and strength. The indicator will flash false positives when the three lines are crisscrossing each other repeatedly, due to choppy market conditions. According to Williams, the alligator is “sleeping” at this time.

Using the Bill Williams Gator Oscillator

The red line indicates the teeth – the line is the average support/resistance level of the strength. If the instrument is within the daily ATR , the Teeth line can be an excellent marker for entering trending trades. The tooth line is an 8-period SMA that travels five bars into the future. It consists of three lines, overlaid on a pricing chart, that represent the jaw, the teeth and the lips of the beast.

  • When setting up the indicator the lips are set to 5 and displaced by 3, the teeth are set to 8 and displaced by 5, and the jaws are set to 13 and displaced by 8.
  • Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.
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  • Bill Williams thinks that fundamental and technical analysis are not enough for good trades because they don’t allow traders to see the real market that is turbulent, nonlinear and chaotic.

This type of geometry is widely used in the study of chaos and other fields like meteorology, geology, and medicine. He pointed to axitrader vs vantage fx who is better in 2021 the fact that fractals are measures of irregularity. When there is a choppy market, the fractal number will be bigger as well.

It is essential to have an understanding of what the color combination of bars in the oscillator mean, as each variety has a different message. The Alligator indicator can be used in any market or time frame. This exposes a significant drawback of the indicator because many awakening signals within large rangeswill fail, triggering whipsaws.

Alternatively, if the price is falling but the momentum is starting to go more positive, that typically means that you are going to see a bullish move sooner or later. That being said, you should keep in mind that when looking for divergence in this oscillator, you need to realize that you are looking at two oscillators. The top half of it can be looked for bearish divergence, while the bottom half can be used to try to find bullish divergence. In order to simplify things, you can refer to this section when trying to use it. At this point, the dialogue box allows the trader to change colors, levels, and visualization, but the main parameters are going to be for the Jaws period, Teeth period, and the Lips period.

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