Alligator
Tue, Apr 15The Alligator indicator was developed by Bill Williams to validate current price trends and their main direction. In addition to recognizing ongoing trends, seasoned traders utilize the Alligator indicator to engage in counter-trend movements.
Essentially, the Alligator technical indicator combines Balance Lines (Moving Averages) that incorporate fractal geometry and nonlinear dynamics. These three Balance Lines are referred to as the Jaw, the Teeth, and the Lips. The blue line, known as the Alligator’s Jaw, represents the Balance Line for the time frame used to create the chart (a 13-period Smoothed Moving Average, projected 8 bars into the future). The red line, or Alligator’s Teeth, serves as the Balance Line for the next lower time frame (an 8-period Smoothed Moving Average, shifted 5 bars into the future). The green line, called the Alligator’s Lips, is the Balance Line for the subsequent lower time frame (a 5-period Smoothed Moving Average, moved 3 bars into the future).
The Lips, Teeth, and Jaw of the Alligator illustrate the interaction between different time periods. Since clear trends are observable only 15 to 30 percent of the time, it is crucial to follow these trends and avoid trading in markets that fluctuate within limited price ranges.
The Alligator is said to be sleeping when the Jaw, Teeth, and Lips are closed or intertwined. During this sleep, the Alligator becomes increasingly hungry. The longer it remains asleep, the hungrier it will be upon waking.
When the Alligator awakens, its first action is to open its mouth and yawn. Following this, it detects the scent of food—either the flesh of a bull or a bear—and begins its hunt. After consuming enough to feel satisfied, the Alligator enters a food coma, losing interest in the food/price as the Balance Lines converge. This is the optimal time to take profits.
Default Parameters:
- (13) – Number of Periods for Jaw
- (8) – Number of Periods for Teeth
- (5) – Number of Periods for Lips
- (8,5,3) – Shift for Jaw, Teeth, Lips, maintaining the structure as much as possible.
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