Introduction
Bill Williams introduced the Alligator indicator in 1995. There are three lines of SEMA, overlaid on a pricing chart, that represent the jaw, the teeth and the lips of the beast, and was created to help the trader confirm the presence of a trend and its direction.
Formula
The Alligator’s Jaw, the “Blue” line, is a 13-period Smoothed Moving Average, moved into the future by 8 bars;
The Alligator’s Teeth, the “Red” line, is an 8-period Smoothed Moving Average, moved by 5 bars into the future;
The Alligator’s Lips, the “Green” line, is a 5-period Smoothed Moving Average, moved by 3 bars into the future.
The Alligator indicator has three lines – green, red, and blue. The green line tracks closest to the price action, the red line is the middle average and the blue line is the furthest from the price action.
Alligator has three stages
Sleeping Alligator
The signs of a sleeping Alligator are when the three lines are close to each other. This translates to low volatility and trading should be avoided during these lull periods.
Awakening Alligator
When the lips of the Alligator (green line) cross the teeth (red line) and the jaws (blue line). If the lips cross the other two lines in an upwards fashion, we have an awakening bullish Alligator. If the lips cross the other lines in a downward fashion, we have an awakening bearish Alligator.
Eating Alligator
The Alligator could start eating after waking up. The signal for a hungry Alligator is after the completion of the waking up stage, a candle closes below or above the three lines. This is when we should go long or short respectively.
Alligator indicator helps the trader stay in the position for a longer period and works best the longer the period of sleep.
Bill Williams introduced the Alligator indicator in 1995. There are three lines of SEMA, overlaid on a pricing chart, that represent the jaw, the teeth and the lips of the beast, and was created to help the trader confirm the presence of a trend and its direction.
Formula
The Alligator’s Jaw, the “Blue” line, is a 13-period Smoothed Moving Average, moved into the future by 8 bars;
The Alligator’s Teeth, the “Red” line, is an 8-period Smoothed Moving Average, moved by 5 bars into the future;
The Alligator’s Lips, the “Green” line, is a 5-period Smoothed Moving Average, moved by 3 bars into the future.
Alligator has three stages
Sleeping Alligator
The signs of a sleeping Alligator are when the three lines are close to each other. This translates to low volatility and trading should be avoided during these lull periods.
Awakening Alligator
When the lips of the Alligator (green line) cross the teeth (red line) and the jaws (blue line). If the lips cross the other two lines in an upwards fashion, we have an awakening bullish Alligator. If the lips cross the other lines in a downward fashion, we have an awakening bearish Alligator.
Eating Alligator
The Alligator could start eating after waking up. The signal for a hungry Alligator is after the completion of the waking up stage, a candle closes below or above the three lines. This is when we should go long or short respectively.
Alligator indicator helps the trader stay in the position for a longer period and works best the longer the period of sleep.
Comment: