For this article, we will try to provide an explanation of how to trade using the Alligator indicator.
The Alligator indicator is one of the standard indicators in MT4 which is often used to analyze the trends.
This indicator was first introduced by Bill William, a well-known technical expert, and trader who developed chaos theory effects and special effects in the market.
This indicator is called the Alligator because Bill William analogizes the activities of market participants like alligators.
That is, the rhythm of the enthusiasm of buyers and sellers in forex trading is similar to the predator's biological cycle.
The analogy is that Alligator will feel hungry after waking up from their long sleep. This can be equated with market conditions while being sideways.
When sideways, traders will generally wait for the opportunity to hunt for moments to open positions.
Well, when traders are competing to get the best price, it is usually the breakout that starts to occur and a new trend is formed.
Market trends that occur illustrate how active market participants are to get a chance. Usually, the longer the sideways period lasts, the stronger the willingness of traders to get the best price.
Advantages of the Alligator Indicator
There are several advantages and benefits that the Alligator Forex indicator has, including:
The Alligator indicator is a standard indicator that already exists in MetaTrader, so it's easy to install and use
The Alligator indicator can stand alone or be combined with other indicators to find out potential targets
This indicator is useful for assisting technical analysis in trading currencies or stock indices.
How to Read and Use Alligator Indicator Signals
The default parameter of the Alligator is 13/8/5. You can also use the 8/5/3 parameter as a comparison. We see that the 8/5/3 parameter is sharper than 13/8/5.
Here are the formulas of technical indicators: Alligator.
The Alligator's Jaw (the blue line) or the Alligator Jaw (as indicated by the blue line) is the 13th period Simple Moving Average indicator in the median (High + Low) / 2 value which shows the price predictions of 8 bars in the future.
The Alligator's Teeth (the red line) or the Alligator gear (indicated by the red line) is the period 8 Simple Moving Average indicator in the median (High + Low) / 2 value which shows the price prediction of 5 bars in the future.
The Alligator's Lips (the green line) or the Alligator lips (as indicated by the red line) are the period 5 Simple Moving Average indicators in the median (High + Low) / 2 value which indicates the price predictions of 2 bars in the future.
The use of the Alligator indicator is to determine which Trend moves Up or Down. In accordance with the explanation of consecutive Jaws, Teeth and Lips and pointing upwards without anyone crossing the Upward Trend, and vice versa. In essence, the short-term trend (period 5) is in line with the medium-term trend (period 8) and is also in line with the long-term trend (period 13).
So once again the lines of each trend must be sequential and not crossed so that it forms like a crocodile's mouth, either uptrend or downtrend.
How to attach the Alligator Indicator on MT4
Because this indicator is available by default in MT4. You just need to follow these simple instructions:
Click Insert -> Indicators -> Bill Williams -> Alligator
How to Trading With Alligator Indicator?
The Alligator is said to sleep when all three lines collide irregularly. Under these conditions, the market is usually in a sideways condition. Avoid opening a position until you get the following signal, which is when the Alligator indicator starts to "wake up".
Next, when the red and green lines (teeth and lips) begin to intersect in one direction towards the blue line (jaw), the Crocodile has awakened. Therefore, get ready to open a position. The principle is still exactly the same as the moving average crossing signal; if it crosses up it means the price will go up, or it will go down if it cuts down.
When the trend begins to form, you can consider holding the position as long as the "mouth" is wide open. The condition is clearly visible when the three lines move in one direction and continue to increase in width.
Be careful when the width of the mouth starts to narrow. That means the Alligator indicator indicates that the Crocodile starts to satiate and wants to rest. Therefore, get ready to close the position when the red and green lines (lips and teeth) start to move in the opposite direction from the previous trend
Indicator Alligator with Fractal
Let's consider fractal signals now. This is like the 5 series of middle candles having the highest maximum and lowest minimum prices.
If the fractal appears above the Alligator then we have a signal to buy if it appears below the Alligator. We have a signal to sell. The best signal is when the lips, teeth, and jaws are interwoven and there is a high probability of movement. The Alligator is in a state of "sleeping", he is "hungry" and the price will "run away".
Is this Alligator Indicator the best?
Well, usually, there is no perfect indicator. The same is true of Bill William's Alligator indicator.
The Alligator indicator is right for use by beginners because of the ease of understanding and getting signals to open positions. Unfortunately, accuracy is sometimes not strong enough.
This is due to the lagging nature of this indicator. In other words, when prices have moved with rapid and sharp price movements, generally these indicators will be too late to respond.
So the suggestion, use this indicator in major pairs with a clear and stable trend. Second, avoid trading news because, during important news releases, price movements will occur very quickly and unexpectedly.
In conclusion, the Alligator indicator is worth trying, especially if you are just learning about trading trends