The Lip line should be below the Teeth, and the Teeth should be below the Alligator’s Jaw. Starting from the European trading session, the Alligator begins to wake up, the lines start to line up. During the first trading hours of the European session, the price closes above the Alligator’s mouth. We notice this moment and decide to look for an entry point to buy gold. At the end of the trading session on January 18, 2021 – the beginning of the trading session on January 19, 2021, the Alligator fell asleep.
- The single crossing is your signal to enter a trade, after the closing candle is registered below the Green line.
- The simplest trading strategy and trade signal for the Alligator is to trade the close of a candlestick after it crosses the lines.
- Should you need such advice, consult a licensed financial or tax advisor.
- The Lips line rotates and crosses the fastest, indicating a shift in trend, whereas the jaw turns and travels the slowest.
- Another reason to exit a trade manually if the price passes the average daily move (suitable for intraday traders).
The creator was sure that the former is when most institutional traders book most of their profits. Also, the moving averages that make up the Alligator xcritical overview indicator can often act as dynamic resistance or support. You can use it as a buy or sell signal depending on which way the lines crosses.
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Alligator indicator is a trend-following indicator that was first described by Bill Williams in his book called Trading Chaos. Bill Williams likes to use colorful names for his indicators rather than the dry technical names — such as the RSI, ATR, and Stochastic — used by his counterpart. While you may not be able to pick the exact price the trend begins, getting in as close to the beginning as possible should be your goal. As for a stop loss when using the Alligator, consider using a multiple of the average true range or use previous swing high and lows. Using a Forex example, this is a daily price chart of the GBPUSD leading into December 2021. IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority.
- References to products, offers, and rates from third party sites often change.
- Buying exactly when the crossover happens will often lead to a loss.
- Similarly, once you identified downtrend in daily, you will look for the uptrend in 4 Hour chart.
- Wait until the Alligator wakes up and all its lines arrange in a particular direction.
The same logic of multiple timeframes can be applied in various time frames including a very short- term to very long term. Similarly, once you identified downtrend in daily, you will look for the uptrend in 4 Hour chart. In simple words, you are looking for a wave inside the flow to identify the move in a different direction so as to identify a proper entry point. So you may aim to enter a wave in a smaller time frame say 4 hours in a different direction to find a good entry point. You should always enter the trade when it is entering into a particular trend and avoid when these lines are twisted together.
It helps traders identify the start and end of trends in the market. The sleeping period is shown when the lines are intertwined and close together. As the trend power decreases and eventually comes to an end, the balance lines come closer together. The fast green line making cross back over the slower lines tells us that the Alligator has had its fill of food and therefore satisfied, thus a sign for you to take your profit.
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The Stop Loss installation on the fastest AlligatorsLips will cause the closing of a position at small kickbacks against a trend that doesn’t give stable profit. The range of volatility is defined by distance from green to the blue line, and the tilt angle allows to estimate force of a new trend. While the price moves higher than green line the trend is bull. On a turn or transition in flat there is the reverse crossing of lines, but it is obligatory – according to the same scheme. The return intersection of lines (The Alligator loses interest in «food») before a turn or consolidation is considered the moment of the closing of positions. Crossing it by the price is considered the advancing signal, but you shouldn’t open the transaction.
You can try trading with the Alligator indicator on the demo account without registration. A stop loss is set above the high of the most recent upward fractal. You only need to set the display color and size of the icons. The lines do not indicate a specific direction, they are located in the horizontal plane. Elearnmarkets (ELM) is a complete financial market portal where the market experts have taken the onus to spread financial education. ELM constantly experiments with new education methodologies and technologies to make financial education effective, affordable and accessible to all.
You have noticed that the alligator works with the stochastic oscillator. Other tools you can use are the relative strength index and the moving soap vs rest web services average convergence divergence. The Alligator indicator uses a combination of moving averages to determine whether there is a trend or not.
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While grinding through sideways ranges the other percent of the time. The developer believed that individuals and institutions collect most of their profits capital markets forex broker during strongly trending periods. The late, iconic forex trader, Bill Williams made the Williams Alligator technical analysis indicator in 1995.
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In a period of low volatility, when the three lines are close together, it is usually a sign that the price will make a major move. Prices are moving decisively in a particular direction, and the trend is strong. Traders can use the Eating phase to ride the trend, entering positions in the direction indicated by the Alligator’s lines. This phase is where traders aim to maximize profits as long as the trend remains intact. First, you need to look at a chart that is either trending upwards or moving downwards. It is wrong to use it when the price of an asset is consolidating.
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This script is based heavily on “Support/Resistance Zones x3” by Lij_MC
What I did is went and added alerts for when price breakouts the support line/zone. All information on The Forex Geek website is for educational purposes only and is not intended to provide financial advice. Any statements about profits or income, expressed or implied, do not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold The Forex Geek and any authorized distributors of this information harmless in any and all ways. Depending on the position of the lines, the state of the market can be determined and with the help of additional filters, trading opportunities can be identified.
First, a trader could place a support level at the nearest lows (2). However, as the trend was solid, they would miss an opportunity to gain more. By using a trailing take-profit, they could exit the market when the %K line of the stochastic oscillator breaks above its %D line in an oversold area (3).
Conveniently, this indicator is already the basis of the trading strategy. Alligator shows both the direction of the trend and the zone of the possible end of the correction. Traders can choose to filter and find entry points according to their own market analysis.