- Type of Indicator: Trend-Following
- Creator: Bill Williams
- When Created: 1995
- First Mentioned In: Trading Chaos by Bill Williams.
What Is The Williams Alligator?
The Williams Alligator indicator is a trend-following technical analysis tool created by Bill Williams. It is used to identify the presence of a trending market and potential entry and exit points.
The Alligator consists of three smoothed moving averages, representing the jaw, teeth, and lips of an alligator. The tool is designed to signal when a security is trending and when it is not.
The Alligator is calculated using three smoothed moving averages, with different periods and colors:
- The Jaw (blue line) is a 13-period smoothed moving average, shifted 8 bars into the future.
- The Teeth (red line) is an 8-period smoothed moving average, shifted 5 bars into the future.
- The Lips (green line) is a 5-period smoothed moving average, shifted 3 bars into the future.
How Do You Read The Williams Alligator?
The Williams Alligator indicator provides traders with information about the presence and strength of a trend.
When the three lines of the Alligator are intertwined, the market is said to be sleeping or ranging.
However, when the lines diverge and move away from each other, the market is said to be trending.
Traders can use the Alligator to identify potential entry and exit points, or to ride a trend until it ends.
How Does The Williams Alligator Work?
The Alligator works by combining three smoothed moving averages, representing the jaw, teeth, and lips of an alligator.
When the three lines are intertwined, the Alligator signals that the market is ranging or sleeping.
However, when the lines diverge and move away from each other, the Alligator signals that the market is trending.
How Is The Williams Alligator Calculated?
The Alligator is calculated using three smoothed moving averages:
- The Jaw (blue line) is a 13-period smoothed moving average, shifted 8 bars into the future.
- The Teeth (red line) is an 8-period smoothed moving average, shifted 5 bars into the future.
- The Lips (green line) is a 5-period smoothed moving average, shifted 3 bars into the future.
Auto Amazon Links: No products found.
How Do You Use The Williams Alligator?
Trend Identification: The Alligator can be used to identify the presence and strength of a trend. When the three lines of the Alligator are intertwined, the market is said to be sleeping or ranging. However, when the lines diverge and move away from each other, the market is said to be trending.
Entry and Exit Points: The Alligator can be used to identify potential entry and exit points in a trending market. Traders can enter long positions when the green line crosses above the red and blue lines, and enter short positions when the green line crosses below the red and blue lines. Traders can also use the Alligator to stay in the trend until it ends. To do this, wait to exit long positions when the green line crosses below the red and blue lines. In contrast, wait to exit short positions when the green line crosses above the red and blue lines.
Additional Trading & Risk Management Tips
Use the Williams Alligator in conjunction with other technical indicators and chart patterns to improve the accuracy of your trading signals.
Be patient and wait for the Alligator to signal a trending market before entering a position, as false signals can occur in ranging or sleeping markets.
Adjust the periods of the Alligator’s moving averages to suit your specific trading style and the market you are analyzing. Shorter periods will make the Alligator more sensitive to price changes, while longer periods will make it less sensitive.
Consider using the Alligator in combination with other Bill Williams indicators, such as the Awesome Oscillator or the Fractals, to confirm potential trading signals and to confirm the strength and direction of the trend.
Use proper risk management techniques to protect your investments, and always consider other factors in addition to the Alligator when making trading decisions.
Be aware that the Alligator is a lagging indicator. This means it reflects past price movements and may not accurately predict future price movements.
Monitor the Alligator for crossovers between the green line and the other two lines, as well as for changes in the direction of the three lines, which can signal potential trend reversals or changes in market direction.
Combine the tool with support and resistance levels or trendlines to confirm potential entry and exit points or identify areas of confluence.
Finally, practice using the Alligator on historical data and demo trading accounts to evaluate its effectiveness for your specific trading style and market conditions before incorporating it into your live trading strategy. Practice using the Williams Alligator using a TradingView account to backtest performance.
About the Author
