Bill Williams 3 Lines

price chart

The Alligator is an indicator that was developed by a famous trader Bill Williams. He also described the trading strategy of the same name that uses the Alligator indicator. The indicator gives signals when the three lines – Jaw, Teeth, and Lips – converge and diverge. The Jaw is the line that turns the slowest, while the Lips turn and cross the fastest, signaling a change in trend. If lines are intertwined or laid in the wrong order or are moving close together as one, it means that Alligator is sleeping with its mouth closed. Here’s a trading system you can apply to trending markets such as the currencies.

alligator trading

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The indicator is quite popular and included to the analysis set of most terminals. Bill Williams used it in the system “Trading chaos” described in his book “New Trading Dimensions”. To put it metaphorically, the alligator wakes up, feels the smell of food and opens the mouth to eat. When it is fed, the alligator closes its mouth and falls asleep.

Williams Alligator

Following the explanation of consecutive Jaws, Teeth, and Lips and pointing upwards without anyone crossing the Upward Trend, and vice versa. But to add insight into the alligator formula, below is the order of the formula. YouTube channel to find life hacks and ideas that will help you to trade efficiently with the ATAS platform. And you can continue using the program even after the 14-day trial period. The first two weeks of use of the platform give access to its full functionality with 7-day history limit. Keep in mind that trading with margin may be subject to taxation.

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By combining the indicator with the MACD, you reduce the chances of a false breakout. This is a similar idea to when you are using the moving average in trend following. In the past few weeks, we have focused on sharing our knowledge on some of the common technical indicators like the Relative Strength Index and Bollinger Bands.

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Because Alligator included to the lagging nature of this indicator. In other words, when prices have moved with rapid and sharp price movements, generally these indicators will be too late to respond. If the fractal appears above the Alligator then we have a signal to buy if it appears below the Alligator. The best signal is when the lips, teeth, and jaws are interwoven and there is a high probability of movement. The Alligator is in a state of “sleeping”, he is “hungry” and the price will “run away”.

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If you prefer working on the high , then you might use trailing by the candles’ shadows, extremums or fractals. Like all the moving averages, the alligator is a lagging indicator, too. Such a lag in getting a trade signal leads to a partial loss of profit. But this lag functions as a filter and helps eliminate insignificant and false signals. Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading.

Alligator Indicator by Bill Williams

Description of Laguerre RSI parameters and forex trading strategies with Laguerre RSI indicator. To add the Alligator strategy to the MT4 chart, you need to select the “Insert” menu, click on the “Indicators” tab. Select “Bill Williams” in the “Indicators” menu and select the name “Alligator” from the list. After that, set the required technical indicator parameters or leave the default ones and click “OK.” The indicator will be added to the chart of the trading instrument. You can apply the Alligator with the standard parameters of 13;8;5. But there will be many false buy or sell signals in this case.

  • Any MetaTrader terminal offers such parameters by default.
  • Green line indicates the balance line of the Lips; it is the weakest level.
  • If the sell fractal is below the teeth, then you place a pending order just below it.
  • Oftentimes, these trade signals appear before a crossover to the alligator lines, allowing traders to catch trends earlier.

The main drive of Bill William’s books is that traditional trading indicators do not work because they ignore the chaotic nature of markets. This failed Alligator trade was a precursor to a trading range in which Alligator signals were unreliable. This daily chart of Walt Disney shows a wide trading range in which we observed several unreliable Alligator signals. The pullback up to the middle moving average ended with an inside bar. Bill Williams uses a host of trading tools including Alligator, Awesome Oscillator, Acceleration/Deceleration, Fractals, and Market Facilitation Index. If you want to use the Alligator with these indicators, refer to his books for more information.

At this scale you are waiting for the alligator moving against the day signal. The Alligator is one technical tool that metaphorically “sleeps” during ranging periods, and then awakens quickly to feed voraciously, as per the example depicted above. It compares momentum for the last five candlesticks with the momentum of the last thirty-four candlesticks of a bigger timeframe.

  • If the three lines are flat and entwined, then the Alligator’s mouth is closed and he is said to be sleeping.
  • However, we got stopped out by an outside bar almost immediately.
  • The Take Profit is set at the distance twice as much that of the stop loss.
  • The Alligator is one of the many trading indicators that you should try.
  • It is used to spot the entry points in slow trends or in conservative forex trading strategies when traders prefer to trade only in the strongest levels/zones.
  • Conversely, the beginning of a downtrend is a signal to consider closing of opened Buy positions and opening of Sell ones.

Therefore, be prepared to close positions when the red and green lines start moving in the opposite direction of the previous trend. The Williams Alligator is a technical analysis indicator developed by the late, iconic forex trader Bill Williams, who has given the indicator his namesake. Once you become accustomed to the various signals provided by the Alligator, applying a related strategy in real time follows a predictable pattern. First, the Alligator sleeps, begins to wake when the ranging period concludes, and then persuades you to hold on while it feeds. The latter point is one more rule to follow – stay in the trade while the three lines are apart. If the Green line goes flat for a period, it is also time to consider closing the position.

Alligator indicator calculation formula is a straightforward indicator, included in most trading platforms by default. This suggests that even a beginner can trade with the Alligator. However, for more profitable and comfortable trading, a newbie will have to master other analytical tools in order to detail entry points and filter false signals.

The other, the market is more in a trading range condition that can be difficult to trade. SHORT trade setups are valid if the LOW fractal is below the “alligator’s teeth” and Williams Percent Range below -50 level. Fractals can appear with only one candle to the right of it but be aware that this is an unconfirmed fractal because the price action may pierce through the level. So in order for a fractal to appear and stay on the chart forever, the trader must wait for 2 candles to the right of the fractal. Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment.

The beginning of an uptrend is a signal to consider closing of opened Sell positions and opening of Buy ones. Conversely, the beginning of a downtrend is a signal to consider closing of opened Buy positions and opening of Sell ones. Alligator Lips shifting periods – the parameter allows specifying the number of periods, over which the shorter-period moving average indicator is to be shifted into the future. The possible parameter’s values are from 0 through 300. The smaller the number is, the more sensitive to the market changes the ALLIGATOR indicator is and vice versa.

You need confirmation in the form of a fractal directed upwards or one more signal received from another indicator . The periods, type of moving averages and parameters of shift correspond to Fibonacci’s number due to that steadily compensate the effect of mutual delay. On the price chart, the lines can stay together intertwining , or they can diverge from each other , and stay more or less parallel to each other for some time , and then converge again . The direction of the lines moving up or down on the chart indicates the trend’s direction . From those states, a trader can determine if they will use a range trading strategy, a trend trading strategy, or wait for a breakout strategy to be used. The Alligator indicator was part of the Bill Williams trading system who suggested markets trend only 15-30% of the time.

If there is a crossover at closing time, you have a signal. In the event the moving average crossover did not happen, you would have to wait for the next closing price. Once you have opened a position, the best area to place a stop-loss is over the price pivot . In this example, there was a severe downtrend, which slowed when traders took profits. The trend commenced once again, but still had room to run before recovering. This simple trading system could have yielded a profitable trade of 250 “pips” or more on the front end.


“Displaced” means that the reading is adjusted X bars into the future which is believed to better forecasts future trend direction. It is not complicated to determine its direction when the price is higher then jaws this means that the trend is upwards if the price is lower then the trend is down . Fractals and Alligator indicators – They don’t only offer the places to set beneficial orders but also allow to learn fast the wave analysis on which all the author’s concept is based.


Having eaten enough to feel quite full, the Alligator starts to lose interest in the food/price . Lips, Teeth, and Jaw of the Alligator show the interaction of different time periods. In principle, the Alligator technical indicator is a combination of Balance Lines that use fractal geometry and nonlinear dynamics. The Alligator is used to confirm current price trends and their primary direction. Harness the market intelligence you need to build your trading strategies.