25/07/ · The Alligator indicator was invented by Bill Williams and uses 3 lines which are actually moving averages with a spin. Markets trend and market range and the 3 lines of the Alligator indicator, known as the jaws teeth and lips, is designed to alert traders When using these indicators as confirmation with setups on our other tools mentioned you end up with higher probability trades which is highly recommended. (Highly recommended). Our 3rd indicator in the suite is our support and resistance indicator which shows support and resistance off pivot levels 24/01/ · But using indicators such as Open Interest or Cumulative Volume Delta can give you a very quick heads up on what is going on. Volume weighted average price – VWAP. Volume weighted average price (VWAP) is a very popular indicator which a lot of different options. It has been covered in-depth in this article
Alligator Indicator - How To Use It As A Trading Strategy
The Alligator indicator was invented by Bill Williams and uses 3 lines which are actually moving averages with a spin. Markets trend and market range and the 3 lines of the Alligator indicator, known as the jaws teeth and lips, is designed to alert traders to the presence of either of those market states. From those states, a trader can determine if they will use a range trading strategya trend trading strategy, or wait for a breakout strategy to be used. Three smoothed moving averages are used however they are displaced moving averages.
This simply means that the reading is adjusted X bars into the future which better forecasts the future trend direction. There are custom indicators for various charts, including Metatrader, to make it easy to apply these averages to your charts. When the 3 lines are intertwined, we do not have a trend. This is generally a time of low volatility and most traders may want to find another instrument to trade. The lips of the Alligator, the green line, is the fastest moving average and will be using indicators in trading first one a trader will want to monitor.
You want to see the green line cross both of the slower moving averages. This is a sign that the Alligator is waking up. We will also see the lips and the jaw start to turn in the direction of the green line. Considering an up trend, the green line lips using indicators in trading, crosses the red and sometimes the blue line depending on the market state. The red line teeth starts to head upwards crossing the blue jaw line and we now determine an uptrend is in place.
Here is a great analogy which will help you decide when a trading opportunity could be presenting itself:. When the 3 lines of the Alligator indicator are intertwined, using indicators in trading, the Alligator is sleeping. When an Alligator is sleeping, nothing interesting is going on.
The longer the Alligator sleeps, the hungrier it may be when it awakes. Think of a market that is ranging — we know it will break out and the longer the range continues, the more violent the breakout can be. As the green line starts to cross the lips openingwe could be looking at an Alligator getting ready to feed. This is the time that you want to be on alert for a trading using indicators in trading. As the green line continues in one direction, the red line which represents the teeth of the Alligator, begins to separate and move in the same direction — the teeth are opening.
The trader is looking to feast on the price action using indicators in trading is happening. At this point, you have learned how to setup and use the Williams Alligator to determine the state of the market and the trend direction. There are several trading strategies you can use and keep in mind that all indicator based strategies do lag the market. The indicator alerts us to 3 stages of market development and with understanding those, you can design a simple approach to trading the market:.
You must keep in mind that since we are using displaced moving averages, each of the 3 lines will using indicators in trading plotted ahead of price by the factor of the displacement — 3, 5, and 8 periods. This may affect the trading strategies you use. When the Alligator is sleeping, the market is range bound and a range trading strategy may be used which can give you a jump into the market early.
You can see in this graphic the 3 lines mixed together. When this occurs, section of the previous high and low and using your entry tactics, trade inside the range. At the same time, the spacing of the Alligator lines is supporting your short trade. Once the lines have shown a direction, you can resort to using a price pattern that is a staple of all traders — pullbacks.
You want using indicators in trading see all lines pointed in the same direction, in order, which shows a trend is underway. Unlike the first strategy, trading pullbacks in a maturing trend does pose risks as the trend may run before giving a trading opportunity. You can determine the length of pullback needed by choosing where price has to pull back to, using indicators in trading.
Here you can see obvious pullbacks that have pulled to the green and red line while the blue using indicators in trading the upwards slope.
The horizontal line is not a perfect pullback but the tail on the lower green candlestick is a price action reversal near the first pullback low, using indicators in trading.
On the far right, you can see this pullback failed however there was not break above the yellow line before price began to close under the 3 lines. The simplest trading strategy for the Alligator is to trade the close of a candlestick after it crosses the lines.
I would suggest that traders look at support and resistance to ensure the buy and sell signal is not right into a previous cluster of price. Note the the green line has crossed over the red to the downside. Remember, these lines are displaced into the future and would have plotted in front of the candlestick we are shorting. 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.
The most important part of the Bill Williams Alligator is when the 3 lines are mixed together. This is when the Alligator is considered to be sleeping and no trading signals are present. You should keep these instruments on your radar especially if price action is hinting at an increase in momentum, using indicators in trading. The best time to get on board a trend move is just before it happens.
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. When the Alligator is feeding, watch for pullbacks against the main trend direction and trade those moves with a pullback strategy. As with any trading strategy, it is vital that you test it, lay out a trading plan, and ensure risk management is priority one. Hey John, using indicators in trading.
I personally trade daily charts. Any timeframe you choose, using indicators in trading, make sure to test it. With moving averages on lower time frames, you can get a ton of whip back and forth.
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Learn About The Alligator Indicator. July 25, Posted by: CoachShane Categories: Trading Article, Trading Indicators 5 Comments. Markets trend and market range and the 3 lines of the Alligator indicator, known as the jaws teeth and lips, is designed to alert traders to the presence of either of those market states From those states, a trader can determine if they will use a range trading strategya trend trading strategy, or wait for a breakout strategy to be used.
Author: CoachShane. Shane his trading using indicators in trading inbecame a Netpicks customer in 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. This has allowed less time in front of the computer without an adverse affect on returns. July 22, at pm Reply. April 2, at pm Reply.
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25/07/ · The Alligator indicator was invented by Bill Williams and uses 3 lines which are actually moving averages with a spin. Markets trend and market range and the 3 lines of the Alligator indicator, known as the jaws teeth and lips, is designed to alert traders 14/11/ · Any traders should start using swing trading indicators before opening any position. Generally, you will look for good entry points by using swing trading indicators. It would also be best if you used the indicators to monitor the positions while they are open. By doing this, you can exit the market at the right time and take the maximum profits Indicator redundancy – duplicate signals. Indicator redundancy means that a trader uses different indicators which belong to the same indicator class and then show the same information on a trader’s charts. The screenshot below shows a chart with 3 momentum indicators (MACD, RSI and the Stochastic). Essentially, all 3 indicators provide the
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