What is the Alligator indicator, how to define and use it

The trend indicator “Alligator” (Williams Alligator) was developed in 1995 by the American trader B. Williams, a specialist in the field of market psychology. His idea was based on the assumption that assets are in a state of growth or decline on average from 15% to 30% of the time of the trading session. It is during these periods that investors receive the main profit. “Alligator” is able to show the beginning and end of such intervals.

What the Alligator indicator consists of and how it looks on the chart

“Alligator” includes 3
moving averages that have periods of 5, 8, 13 and are shifted 8, 5, 3 bars into the future, respectively. Each of them has its own name and unique characteristics:

1. “Alligator’s jaw”, or SMMA (median price, 13, 8), colored blue.
2. Alligator teeth, or SMMA (median price, 8, 5), colored red.
3. “Alligator Lips”, or SMMA (median price, 8, 5), colored green.

Indicator Alligator Bill Williams – “lips, jaws and teeth” on the chart [/ caption] B. Williams compared the dynamics of the indicator with the tactics of an alligator. The tight intertwining of moving averages means that the “predator” is asleep (the chart is in sideways movement). The longer the dream lasts, the more hungry the “beast” becomes. The moving average divergence means that the “alligator” is waking up and opening its “mouth” wide, trying to absorb the emerging “bulls” or “bears” (a trend is forming). Periodically, the “predator” suspends the “hunt”. This means that the market is saturated, as evidenced by the convergence of the indicator lines. It is believed that at this moment it is time to take profits and expect new signals about the formation of a trend. Thus, when generating trading signals, the indicator takes into account the relationship of convergence and divergence.

When the Alligator Lips cross other moving averages from top to bottom, this indicates the possibility of selling the asset, from the bottom to the top – about the possibility of buying.

The indicator can be used as the only technical trading tool. But to improve forecasts, it is recommended to take into account other data: price behavior, volumes, etc.

Setting up the Alligator indicator in the terminal

“Alligator” is included in the standard set of
trading terminal indicators , so it is easy and quick to set up. You will have to download and install the tool with an alert yourself.

Setting up the indicator in the Quik terminal

After opening the chart, right-click anywhere in its range. In the window that opens, select an indicator and click “Add”.
Right-click on any moving average, select the “Edit” line in the drop-down list.
Adjust the indicator by moving through the tabs. Here you can change the color of the lines, the number of periods, the shift.
Complete the settings by clicking the “Apply” button, then “OK” https://articles.opexflow.com/software-trading/torgovyj-terminal-quik.htm

Setting up the indicator in the MetaTrader terminal

In the terminal window, open and set up the chart. After that, set the indicator: go to the “Insert” item of the main menu, hover over the line “Indicators” and select the desired tool in the drop-down list.
In the settings window that opens, select the color scheme of the indicator.
In the “Parameters” tab, the correctness of the data on periods and shifts of moving averages is checked.
In the “Display” section, select the timeframe.
Press the “OK” button and proceed to view the graph. If you need to change the settings, just right-click on any Alligator line and select Alligator Properties.

Alligator indicator with alert

Angry Alligator is a modification of the standard Alligator with Alert. It is not included in the standard set of technical analysis tools for trading terminals. is a commercial product. It can be purchased from the developer’s website.

Alert indicators are modified tools equipped with the means of providing sound or text signals about significant events in the market. For example, they can inform the trader about a trend reversal, a potential entry point, etc.

“Alligator” with an alert is supplemented with a mode of notifying the user about standard events. It also displays an additional line on the chart, which smooths out signals at high volatility.

Trading Strategies with Alligator

The indicator warns about 3 stages of market development, understanding which, you can develop a simple method of trading in any markets.

State	Indicator behavior	Market situation	Actions
Alligator “sleeping”	Moving averages are intertwined	The market is resting	Inaction or trading in a sideways range
Alligator “wakes up”	The green line crosses the red and blue	High probability of trend formation	Active surveillance and search for a possible breakout point
Alligator “eats”	Interval charts close above/below 3 moving averages	The trend is set	Opening and holding orders

Trades in a sideways range

In the absence of a trend, some traders prefer to trade in a sideways range. In this case, support and resistance zones are used that cross the extremes of the price corridor. Trades are made against these potential boundaries.

Pullback trading

When the moving averages of the indicator indicate an established trend, you can start trading on pullbacks. It is necessary to analyze the chart and identify the prevailing pattern. Technical pullback lines should be parallel, indicating a strong trend.
From the price chart, you can determine the expected duration of the rollback. The example shows how the technical lines approach the green and red moving averages, while the blue one maintains an upward slope. It is also seen that the right rollback did not take place. The breakout did not occur until the price closed below the 3 indicator lines.

Moving Average Crossover Analysis

The simplest trading strategy for the Alligator is to take trades at the close of the candle above/below the moving averages of the indicator, provided that the green and red lines form a cross.
In the example, you can see how the “Alligator Lips” intersect the “Alligator Teeth” from the bottom up. The next candle closes above all moving averages. At this moment, you can open a long position. Subsequent intervals confirm the correctness of this solution. Alligator indicator by Bill Williams – how to use the stock indicator, setup features: https://youtu.be/PQna5hLgurs

Combination of indicators “Alligator” and “Fractals”

Although the Alligator is considered a self-contained technical analysis tool, it is often combined with the Fractals. The last indicator marks extremes on the price chart, marking them with up or down arrows. It was also designed by B. Williams and is included in his trading system. A strategy based on a combination of Alligator and Fractals is trending and therefore does not work in sideways ranges. Its essence is to catch a strong trend at the very beginning of its formation.
If there is a long lateral price movement on the chart, then the alligator is sleeping. In this case, fractals form above and below moving averages. It is necessary to wait for the “awakening of the predator”, which will be indicated by the passage of the green line through the red one. In the example, it crosses from top to bottom. If the signal is true, then the moving averages follow the given impulse down. During this period, the first 2 fractals are closely monitored. The second (real) element is a guideline for placing orders. Trading starts immediately after the breakdown of its extremum. It is best if the candle closes below the actual fractal.

Errors in interpretation

The indicator may give a false signal when 3 lines cross multiple times due to market volatility. However, at this point, the “alligator” continues to “sleep”, and the trader does not need to take any action. This exposes a significant drawback of the indicator, since many wake-up signals do not work in large ranges.