For the Alligator, these are the 13, 8 and 5 periods for jaws, teeth, and lips, respectively.
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Note the Alligator indicator MT4 support on it. In the above example, an exit signal occurs when a Candle closes above the center Red line or teeth of the Alligator.
I saw that the bands of the Forex Alligator are expanding. At the same time, a bearish move was emerging on the chart. This all happens during increasing trading volume, which confirms the authenticity of the signal. Meanwhile, a bearish trend emerged and the price bounced from it for third time. These signals were sufficient to position a short trade with the Aussie on the assumption that the price is starting a decrease.
The plan was to stay in the trade until we get some signals from the Alligator indicator. Live Trading Example I entered on the assumption that I will be hopping into a few hours trade. However, the whole position took more than 30 hours to complete. Notice that the price broke the few times the green line in bullish direction.
However, since I saw that the trend is bigger than usual, I decided to wait for a bigger signal — like a cross between the green and the red line. Therefore I adjusted the Stop Loss order tight and I left the trade for the next morning. When I got up I realized that the trend continues in my favor. 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?
This is very simple: 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.
Moreover, a morning star is perhaps the most powerful bullish reversal pattern ever! Confirmation protects a trading account. The Alligator Forex indicator is the perfect tool for that. Probably as important as the reversal pattern is its confirmation. Without it, traders end up going long, in this case, only to find out that the market comes for their stop.
Look for Fake Crosses Another great Alligator Forex trading system consists of interpreting the crosses. That means, the crosses between the three lines that make the indicator. How about spotting the fake ones? A typical approach is to use the faster average the green line for spotting fake crosses. Therefore, eyes on the green and red lines, please!
When the green line crosses the red one and then turns again without reaching the blue line, a fake move just forms. Hence, in a bullish trend, go long on such a cross. Or, in a bearish trend , go short when the perfect order gets back in place. Keep things simple and logical and profits will come to you. One example of a bearish cross in the chart above shows plenty of further downside potential.
The fake cross was nothing but an opportunity to use what the Alligator Forex platforms offer. And there are more of them. A similar fake cross is possible between the bigger averages: In fact, such a cross is more powerful. It is only normal, as the two lines consider more periods before plotting an actual value. The time frame matters here too. Not for the actual cross, but for setting the right take-profit level.
When a signal as described here appears, consider the time frame before setting the take-profit level. Do that if the signal comes from the daily chart, for example. This way, you adjust your expectations with the time frame used. It calls for two big moving averages crossing. When the fast one moves above the slow one, a golden cross forms. When a death cross appears, the opposite is true. Bears are in control. This Alligator indicator trading system offers a similar interpretation.
The secret is to use the bigger averages in the same way. Therefore, use the red and blue lines as the faster and slower averages. Just like in the case of a golden or death cross. A cross like this shows you the type of the market: Of course, in a bullish market, we want to buy. In a bearish market, shorting a Forex pair works best. Furthermore, use the green line of the Alligator indicator as a confirmation. If not, think twice. The opposite is true when a death cross forms.
One bearish and one bullish. Both are great signals to take with the Forex Alligator indicator. Again, simple things work best in technical analysis. Make the Most of the Shifting Attributes Just like a displaced moving average shifts on the right side of a chart, the Alligator indicator does that too.
When the lines converge or cross, it is time to consider entering or exiting, although a momentum indicator will fix a better exit point. Traders are also attentive to closing Candles. In the above example, an exit signal occurs when a Candle closes above the center Red line or teeth of the Alligator. During the second downward move, the Alligator, for this reason, would have kept you in the trade a little while longer for more profit.
Skill in interpreting and understanding Alligator signals must be developed over time, and complementing the Alligator tool with another indicator or pattern of pricing behavior is always recommended for further confirmation of potential trend changes.
In the next article on the Alligator indicator , we will put all of this information together to illustrate a simple trading system using this Alligator indicator. More forex indicators Risk Statement:
Alligator Indicator Explained – What is the Alligator Indicator? Published: November 8, by Forextraders Bill Williams introduced the Alligator indicator in
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 Alligator indicator in Forex in a profitable trading way. Having a funny name, the indicator shows the power of bulls or bears to reverse a trend. Elliott wave traders can use Alligator as a helping indicator to identify impulsive and corrective waves: when price trades outside Alligator’s mouth, the impulsive wave is .
The Alligator indicator can help traders designate impulse and corrective wave formations. This is the second article in our Alligator series. The Alligator indicator can help traders designate impulse and corrective wave formations. The Alligator indicator is a technical indicator which based on three simple moving averages with different periods and forward offset. It was developed by Bill Williams, the author of "Trading chaos" and "New dimensions in stock trading" books.
Bill Williams' Alligator indicator provides a useful visual tool for trend recognition and deciding when to enter or exit a trade. Read this article and understand the use of Alligator indicator in forex trading.