Bill Williams 3 Lines

The condition is visible when the three lines move in one direction and continue to increase in width. So once again the lines of each trend must be sequential and not crossed so that it forms like an Alligator’s mouth, either uptrend or downtrend. In this condition, the market condition is in a flat condition so that there are not many traders who sell or buy, avoid this condition. When sideways, traders will generally wait for the opportunity to hunt for moments to open positions. This indicator was first introduced by Bill William, a famous technical expert, and trader who developed chaos theory effects and special effects in the market.

Bill Williams was born in 1932 and traded the commodity markets successfully for over 50 years. He later became a trading educator and the author of multiple books on trading psychology, chaos theory and technical analysis in the financial markets. He also developed his own proprietary indicators that are now extremely popular and available on most trading platforms. Meta, formerly Facebook, has an alligator “awakening” signal near the bottom left of the chart, then embarks on a strong uptrend that shows an alligator “eating with open mouth” phase. On the rise, the price drops to the Jawline, but the indicators do not cross each other.

TEMA Formula

This https://trading-market.org/ state is characterized by uncertainty, and one shouldn’t enter trades during this time. To begin with, let’s consider the classic use of the Alligator without using other analysis trading tools. That is, the momentum indicator is used in its original form. The above figure displays the hourly timeframes of the BRENT oil price chart. In the hourly timeframe, I prefer using the following settings of the indicator 21;13;8, but I will cover it in detail later.

The https://forexaggregator.com/ indicator can also help traders designate impulse and corrective wave formations, but the tool works best when combined with a momentum indicator. The trend is always your friend, and the way to consistently win in this venue is to be patient and then ride a trend for all it is worth. In other words, patience is required until opportunities arise during the 20% to 30% trending periods. Earlier, we stated that the indicator signals the trend strength. Let us remind you that the more frequently the price touches the fastest moving average , the sooner the trend will end. As a result, the most common mistake is that traders close the position earlier than they should.

No trading signals are calculated for this indicator. In order to simplify this, take a look at the chart below. This is a classic Bill Williams Fractal bullish signal. If you think about it, again it makes quite a bit of sense that a recent high of five candlesticks being broken to the upside shows renewed strength. Now that the indicator is on the chart, it will tell you when a fractal has been formed.

How to set up the alligator indicator in MetaTrader 4

The indicator falls in the broader category of momentum oscillators, which includes other indicators such as the RSI, Stochastics and MACD. Please read our separate dedicated guide on Awesome Oscillator trading strategies. The Alligator indicator uses three smoothed moving averages, set at five, eight, and 13 periods, which are all Fibonacci numbers. The initial smoothed average is calculated with a simple moving average, adding additional smoothed averages that slow down indicator turns. The market stays still most of the time and spends only 15-30% of the time creating some trends. Many traders get the largest part their profit from these trend moves.

Without filters, it could send many false signals and there is a high risk of causing many losses. You need to adjust settings for each trading style and timeframe individually. A significant flaw is that you need to adjust the Alligator technical indicator parameters for each timeframe individually. However, with this approach, there will be a lot of signals in short timeframes, half of which will be false. In long timeframes, on the contrary, there will be fewer signals, and you will have to wait for entry signals for a long time. The Alligator technical indicator allows a trader to define the ongoing market trend.

This indicator will give you an edge and a way of thinking that you NEVER THOUGHT before because it has a story. The next step is to look at the numbers that are in the indicator. The default periods for the jaw, teeth, and lips periods are 13, 8, and 5. The other important numbers to look at are the shifts. The default shifts in the jaws, teeth, and lips are 8, 5, and 3. The Kairi Relative Index is a technical analysis indicator used to indicate potential buy and sell points based on overbought or oversold conditions.

It is wise to refrain from trading and wait till a trend begins. Alligator Lips Line – is the line of a shorter-period moving average indicator (by default, a five-period SMMA shifted into the future by three periods). The lips of the Alligator, the green line, is the fastest moving average and will be the first one a trader will want to monitor.

Construction of Alligator indicator

This is a symbolic representation of an alligator’s mouth opening and closing. The buy signal is generated when the green line trends above the red and blue line. The sell signal is generated when the blue line trends above the red and green line.

The Alligator was hungry early on, i.e., the 3 lines remained separated for an extended period of time. If this indicator appeals to you, develop a strategy around it and then practice and fine-tune that strategy on a demo system until it is routine. In the example above, the “Blue” line is the Alligator’s jaw, the “Red”, his teeth, and the “Green”, his lips. The “CCI” indicator, or “Aqua” line, has been added to assist in reading the signals generated.

Why should you move the order to the breakeven zone in this case? It is because the Jaw line is responsible for the trend border in the timeframe you trade. If the line is broken out, the trend is likely to change. You wait for the moment when the hourly candlestick breaks through the last formed upward fractal and closes above the high. The Fractals indicator looks like an arrow above the Japanese candlestick up or below the candlestick down on the chart. Risking 1% of the initial deposit, we can afford to enter a trade of 0.45 lots.

Trade with Bill Williams Indicators at AvaTrade

Oftentimes, these trade signals appear before a crossover to the alligator lines, allowing traders to catch trends earlier. Its main purpose is to seek out trends, and to determine possible entry and exit points of your forex trade. 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. He devised a trading system to predict a Forex price action on the basis of several indicators including the Alligator technical indicator.

We offer an unconditional 14-day money back guarantee. If you don’t like the product for whatever reason, we will return the whole amount you paid us. Once we have everything set up, we will send you an email to confirm your subscription. In order to try the indicator performance alone or in the combination with other ones, you can use Forex Tester with the historical data that comes along with the program. So far there are fractals up – only purchases, fractals down – only sales. Further, it is possible to use each following fractal on a trend for an additional entrance.

Alligator Lips smoothing periods – the parameter allows specifying the number of periods, over which the shorter-period moving average indicator is to be calculated. The possible parameter’s values are from 1 through 300. You may combine the Alligator indicator with another momentum-based indicator like CCI to enhance your trading experience and to get better trading signals. The Alligator Indicator is based on the premise that financial markets and securities trend for only 15% to 30% of the time while and grind sideways the other 70% to 85% of the time. And William believed that most traders collect most of their profits during strong trends.

I find this trading method similar to the moving average fake-out by Mark Fisher which also uses three moving averages. Both systems are good at keeping us out of the market when it is going sideways. This means that the Alligator was sleeping and storing energy for an impulse move.

The smoothed moving average is a type of MA that uses a longer period to compute. When it is calculated, it does not refer to a fixed period but takes all available data into account. You calculate this by subtracting the previous SMA from today’s price.

Smoothing of the TEMA Indicator

Traders will then want to watch for a cross of the green and blue lines or a close of a candlestick through the indicator lines before taking action. It also wise for a trader to consider using other indicators rather than the alligator alone. This way, the trader will be able to minimize losses. However, the alligator indicator will be supported by other indicators to confirm the trend. According to Williams, when these three moving averages are twisted together, it means the alligator indicator rests, and so we also rest. But the longer the alligator sleeps, the hungrier it is.

When the Green line flattens or crosses again, it is time to exit. The following trading system is for educational purposes only. Technical analysis takes previous pricing behaviour and attempts to forecast future prices, but, as history has shown, past results are no guarantee of future performance. Over time with practice, you may also develop more helpful hints to enhance these alerts. It’s the time when our Alligator is sleeping, so its jaw, teeth and lips are serried. As a result, all of Bill Williams’s 3 lines are either too close to each other or intertwined.

• Every trader that chooses a trading platform and establishes his retail investor accounts wants to enter a trade at good prices and exit at the peak of a trending price movement.
• If moving averages are entwined, then it is best to be out of the market .
• His idea was to provide an example that will demonstrate the behavior of the market.
• The next step is to look at the numbers that are in the indicator.

His idea was to provide an example that will demonstrate the behavior of the https://forexarena.net/. This example is the alligator that alternates between the periods of sleep and hunting. In this case, there is a “slow” indicator but in the “fast’ timeframe.