While not a moving average , riding trends is its main quality. This article shows how to use the Alligator indicator in Forex in a profitable trading way. Although it has a funny name, the indicator shows the power of bulls or bears to reverse a trend.

For this reason, the indicator is popular among Forex traders, trend followers or contrarians. Together with Fractal, Gator or the Awesome oscillator, the Alligator Forex strategy is unique in every way.

It is part of a special group of indicators. Trading platforms, MetaTrader included, offer the Bill Williams indicators separate from classical trend indicators or oscillators. All traders face a dilemma: to use trend indicators or oscillators for their analysis?

However, one can use both. Regardless of whether it is part of an individual trading system or not, the Alligator indicator shows the right side of the market. Traders use it to find a bullish or bearish market, support or resistance levels, confluence areas, etc. The indicator has a funny name: it comes from the head of an alligator. As part of it, there are three averages. A trading system based on moving averages plots multiple averages on a chart.

The same here. Any Forex Alligator strategy contains three averages, with the above names. Any average has a period that it relates to. For the Alligator, these are the 13, 8 and 5 periods for jaws, teeth, and lips, respectively. All three averages combine the power of the Alligator indicator. One can choose the average type smoothed, simple, exponential, linear weighted and the price to apply it to. When either closing or opening price, a median one or not, multiple settings exist.

What makes this indicator unique is the ability to shift the averages. In fact, with the default settings, the averages shift, leaving a bit of room from the current price until the Alligator Forex indicator. We will use the MetaTrader trading platform to show how to apply it on a chart. However, any trading platform offers it, so the principle is the same.

The result is a pop-up window like the one above giving you customized possibilities. To use it like Bill Williams intended, just leave it with the default settings. Anything is editable, though: colors, levels, etc. The three averages plotted on the chart reflect the time frame you use.

If the Williams Alligator indicator is set on the daily chart, the jaws consider 13 days, teeth 8 and lips 5, respectively. For that, the following information is crucial. When using it, think of a system that follows price. No matter where the price goes, the Alligator goes. These averages closely follow price and keep traders on the trend.

Because of that, missing a trend is virtually impossible. The three elements should NOT cross. When doing that, the perfect order forms. Moreover, this signals a strong trend. The bigger the time frame, the stronger the trend. What can go wrong? Firstly, the price moves aggressively below the green line lips. This is not scary if it is the first attempt. The more the price tries, the weaker the trend becomes.

In a bullish trend, it shows bulls lose steam. Also, they might become wannabe bears. Trading with the Forex Alligator indicator gives two choices: follow the trend and spot the reversal. Secondly, look for the perfect order to break. This is a bearish sign in a bullish trend. In short, trading with the Alligator indicator is easy.

Stay long when the price is above it, and short when it is below. The perfect order is a plus. The perfect order is just one Alligator indicator strategy. It mainly deals with spotting the right trend. And sticking to it. However, Bill Williams designed it for other purposes too.

Keep in mind that it shifts the averages further in time. This shifting allows for greater flexibility. In a way, it resembles the Ichimoku Cloud. That is, on the right side of the chart, obviously! Therefore, future support and resistance levels appear at present time. With the cloud, the price is in a state of equilibrium. It finds a balance between historical and future levels.

These shift backward and forward twenty-six periods. Hence, shifting is not a new concept. Bill Williams sensed its power and used it with the Alligator indicator.

A wonderful Alligator indicator trading system deals with support and resistance levels. Moreover, levels are NOT horizontal. You see, traders sometimes make a fatal mistake. They believe support and resistance can only be horizontal. How about dynamic levels? As a rule of thumb, dynamic support and resistance move along with the price. Therefore, they offer more value.

The three lines that make the Alligator Forex indicator jaws, teeth, and lips do exactly that. They follow the price. If the price rises, the three lines follow. If the price falls, they fall too.

The bigger the distance between the lines, the stronger the support and resistance area. The bigger the time frame, the more difficult for the price to break through. In this way, the area between the first line the green one — lips and the last one the blue one — jaws is dynamic support or resistance. For example, in a bullish trend, it shows support. Note the Alligator indicator MT4 support on it. It starts from the green line and ends with the blue line. The lips offer weak support.

If bears push stronger, they might reach the teeth. Jaws represent the final support. Trading is fun if a logical approach governs it. Decisions to buy or sell should come at support or resistance. For this reason, the Alligator indicator formula is a great tool for traders.

In fact, they go hand in hand. First, one needs to look for a reversal pattern. This can be a double top or bottom, a head and shoulders pattern or a triangle. Or, it can be one of the Japanese candlestick techniques. The Japanese were masters in spotting reversals. As such, most of their techniques deal with trend reversal approaches. Use the Alligator indicator Forex platforms provide as confirmation. What is the confirmation then? The result is one of the best approaches of how to use the Alligator indicator in Forex.

The sleeping period, when the lines are closed and entwined, will see many crossovers that look like trading signals. The key is in looking for the confirmatory divergence of the balance lines and doing so quickly enough to avoid missing out on too much of the start of the trend. Depicted: Admirals MetaTrader 5 - USDCHF Daily Chart. Date Range: 4 February - 31 August Subsequently, the second red vertical line shows the green moving average of the Alligator indicator crossing back below the other moving averages.

This is our signal to sell. Problems can arise with the timing. If the indicator lags too much at the start of the trend, and the fall or rise is steep, we could potentially miss the entire move.

An example of this can be seen with the third vertical red line on the chart above. The price rises quickly and, by the time the green line has crossed above the other two, we have missed most of the move and it is not long before the lines become intertwined again.

No trading tool is perfect. This means that professional traders are always looking for ways to use multiple indicators together to try and shore up the weak spots.

When it comes to the Alligator indicator, for example, some traders might look at a trend indicator that uses a different methodology to see if it confirms the signals. This would help us filter out the false signals in the sleeping phase of the Alligator technical indicator, and might also improve the timing of the trading signals.

Both MT4 and MT5 come with a large selection of indicators by default, but if you want to give yourself a more comprehensive selection of tools, why not try the MetaTrader Supreme Edition plugin? The MetaTrader Supreme Edition - compatible with both MT4 and MT5 - is a free custom plugin which offers a specially extended version of the popular trading platform and comes with a variety of additional technical indicators!

The Forex Alligator Indicator trading system certainly offers more colourful imagery than normal indicators, which some people may find appealing. While it helps in terms of being memorable, the trading rules are a little on the vague side. It is recommended to rigorously test the indicator before use, in order to determine whether it actually yields positive results for you. The best way to test out what works and what doesn't work is with a risk-free demo trading account.

A demo account allows you to trade with virtual currency in real-market conditions so that you are fully prepared before you use these indicators in the live markets! Click the banner below to open a free demo account today:. About Admirals Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8, financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5.

Start trading today! This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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About Admirals. Why Admirals? Regulation Financial Security Secure your trading account Contact Admirals Company News. Help center. Status Page. Login Register. Top search terms: Create an account, Mobile application, Invest account, Web trader platform. How to Use the Alligator Indicator in Forex Trading Admirals Jun 8, 11 Min read.

Table of Contents Why Is it Called the Alligator Analogy? The Three Balance Lines of the Alligator Indicator How to Use the Alligator Indicator in MetaTrader 5 How to Use the Alligator Indicator in Forex Trading Combining the Forex Alligator Indicator With Other Trading Tools Final Thoughts. An all-in-one solution for spending, investing, and managing your money.

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The Alligator indicator is a great Forex trading tool that has been fascinating traders for a long time. While not a moving average , riding trends is its main quality. This article shows how to use the Alligator indicator in Forex in a profitable trading way. Although it has a funny name, the indicator shows the power of bulls or bears to reverse a trend. For this reason, the indicator is popular among Forex traders, trend followers or contrarians.

Together with Fractal, Gator or the Awesome oscillator, the Alligator Forex strategy is unique in every way. It is part of a special group of indicators. Trading platforms, MetaTrader included, offer the Bill Williams indicators separate from classical trend indicators or oscillators.

All traders face a dilemma: to use trend indicators or oscillators for their analysis? However, one can use both. Regardless of whether it is part of an individual trading system or not, the Alligator indicator shows the right side of the market.

Traders use it to find a bullish or bearish market, support or resistance levels, confluence areas, etc. The indicator has a funny name: it comes from the head of an alligator. As part of it, there are three averages. A trading system based on moving averages plots multiple averages on a chart. The same here. Any Forex Alligator strategy contains three averages, with the above names. Any average has a period that it relates to.

For the Alligator, these are the 13, 8 and 5 periods for jaws, teeth, and lips, respectively. All three averages combine the power of the Alligator indicator. One can choose the average type smoothed, simple, exponential, linear weighted and the price to apply it to. When either closing or opening price, a median one or not, multiple settings exist. What makes this indicator unique is the ability to shift the averages.

In fact, with the default settings, the averages shift, leaving a bit of room from the current price until the Alligator Forex indicator. We will use the MetaTrader trading platform to show how to apply it on a chart. However, any trading platform offers it, so the principle is the same.

The result is a pop-up window like the one above giving you customized possibilities. To use it like Bill Williams intended, just leave it with the default settings.

Anything is editable, though: colors, levels, etc. The three averages plotted on the chart reflect the time frame you use. If the Williams Alligator indicator is set on the daily chart, the jaws consider 13 days, teeth 8 and lips 5, respectively. For that, the following information is crucial.

When using it, think of a system that follows price. No matter where the price goes, the Alligator goes. These averages closely follow price and keep traders on the trend. Because of that, missing a trend is virtually impossible. The three elements should NOT cross. When doing that, the perfect order forms. Moreover, this signals a strong trend. The bigger the time frame, the stronger the trend. What can go wrong? Firstly, the price moves aggressively below the green line lips.

This is not scary if it is the first attempt. The more the price tries, the weaker the trend becomes. In a bullish trend, it shows bulls lose steam. Also, they might become wannabe bears.

Trading with the Forex Alligator indicator gives two choices: follow the trend and spot the reversal. Secondly, look for the perfect order to break. This is a bearish sign in a bullish trend. In short, trading with the Alligator indicator is easy.

Stay long when the price is above it, and short when it is below. The perfect order is a plus. The perfect order is just one Alligator indicator strategy. It mainly deals with spotting the right trend. And sticking to it. However, Bill Williams designed it for other purposes too. Keep in mind that it shifts the averages further in time. This shifting allows for greater flexibility. In a way, it resembles the Ichimoku Cloud.

That is, on the right side of the chart, obviously! Therefore, future support and resistance levels appear at present time. With the cloud, the price is in a state of equilibrium. It finds a balance between historical and future levels. These shift backward and forward twenty-six periods. Hence, shifting is not a new concept. Bill Williams sensed its power and used it with the Alligator indicator. A wonderful Alligator indicator trading system deals with support and resistance levels.

Moreover, levels are NOT horizontal. You see, traders sometimes make a fatal mistake. They believe support and resistance can only be horizontal. How about dynamic levels? As a rule of thumb, dynamic support and resistance move along with the price.

Therefore, they offer more value. The three lines that make the Alligator Forex indicator jaws, teeth, and lips do exactly that. They follow the price. If the price rises, the three lines follow. If the price falls, they fall too. The bigger the distance between the lines, the stronger the support and resistance area. The bigger the time frame, the more difficult for the price to break through. In this way, the area between the first line the green one — lips and the last one the blue one — jaws is dynamic support or resistance.

For example, in a bullish trend, it shows support. Note the Alligator indicator MT4 support on it. It starts from the green line and ends with the blue line. The lips offer weak support. If bears push stronger, they might reach the teeth. Jaws represent the final support. Trading is fun if a logical approach governs it. Decisions to buy or sell should come at support or resistance. For this reason, the Alligator indicator formula is a great tool for traders.

In fact, they go hand in hand. First, one needs to look for a reversal pattern. This can be a double top or bottom, a head and shoulders pattern or a triangle.

Or, it can be one of the Japanese candlestick techniques. The Japanese were masters in spotting reversals. As such, most of their techniques deal with trend reversal approaches.

Use the Alligator indicator Forex platforms provide as confirmation. What is the confirmation then? The result is one of the best approaches of how to use the Alligator indicator in Forex. Especially relevant is this system when used with a Japanese candlestick pattern technique.

This means traders cannot go wrong if they respect the Alligator Forex trading system. The best way to test out what works and what doesn't work is with a risk-free demo trading account. Trend indicators attempt to signpost those key times when a trend may be forming. Just like in the case of a golden or death cross. The balance lines are designated as the jaw, the teeth and the lips of the alligator and are as follows:.

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