The Alligator Forex trading strategy suggests that you should watch the arrangement of lines in the chart. You need to learn to identify the market state – when the Alligator sleeps and when it is waking up. It is important to filter signals generated by the Williams indicator to increase the number of profitable trades. The best timeframes to trade with the Alligator are the daily, four-hour, and one-hour timeframes. It makes no sense to use the Alligator in shorter timeframes, as there will be many false signals due to the price noise. The Williams Alligator analyzes stock indexes, equities, commodity and precious metal markets, Forex trading, and cryptocurrency markets.
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 exit signal appears when all three lines meet at one point, the trend direction is not clear, or when the lip line crosses the one of the three lines which is the jaw. This means that the market is full and will now “sleep” in anticipation of new prey (momentum). Over many years, Bill Williams studied the US stock market and watched for regularities.
Buying exactly when the crossover happens will often lead to a loss. Second, it is always important to use it in combination with other indicators like the RSI and MACD. Also, use several tools like the Fibonacci Retracement and Andrews Pitchfork. Alligator is a trend indicator and can be used well when an asset is rising or falling. In most cases, it rarely works when assets are in a consolidation phase.
You may use it for free, but reuse of this code in publication is governed by House rules. Well, lucky us, the calculation is not required in practice. The Alligator indicator can be added to your charts from the indicator list in your charting. Bill Williams introduced the Alligator indicator almost three decades ago in 1995. But it is still a very popular indicator in trading circles.
However, for more profitable and comfortable trading, a newbie will have to master other analytical tools in order to detail entry points and filter false signals. You can think that the Alligator is a complete trading strategy, but it is not so. You need additional filters to detail the entry and exit points.
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When the price hits the highest high in the chart, the price enters a consolidation range. The green balance line crosses the red one, and the red line crosses the blue one. It is not recommended to conduct investment business in a sideways trend. At this moment, you cannot open positions against the trend. Traders who enter trades against the trade by mistake are doomed to failure.
You calculate this by subtracting the previous SMA from today’s price. So, this indicator is his attempt to show traders when the market is trending with many trading opportunities and when it is locked in a range. It is, therefore, the ndax review perfect indicator to trade ranges as well as utilize the range trading strategy. As a matter of fact, many of Bill Williams’ indicators also follow this idea. Last time we discussed how you can use the Awesome Oscillator to create profitable crypto trading strategies and which type of signals it generates. Today we will deep dive into Acceleration/Deceleration (AC) the next Bill Williams indicator, which can also enhance your cryptocurrency trading strategy.
Alligator and MACD
Thus, Bill Williams developed an independent trading system and started to teach traders to use it for investment business. The “Trading Chaos” is still popular and has many followers, and the Williams indicators are still popular. Some commonly used indicators paired with the Williams Alligator include the relative strength indicator, the MACD, the average directional index, the stochastic oscillator, and pivot points.
- Other more complex instruments, included in the Profitunity system serve to filter signals and to detail the entry and exit points in the overbought and oversold markets.
- Take note of these crossovers because they bear your trading signals.
- The red line is an 8-period SMMA shifted by five periods into the future, called the teeth.
How to read the indicator?
First, analyze the stage of the Alligator cycle – if it is sleeping, waking or eating. If the Alligator is waking up, look for an entry point. If the Alligator is falling asleep, exit the trade before start losing money rapidly. Do not trade forex or other market when the Alligator is sleeping. At the end of the trading session on January 18, 2021 – the beginning of the trading session on January 19, 2021, the Alligator fell asleep. This market state is characterized by uncertainty, and one shouldn’t enter trades during this time.
Price Rate Of Change Indicator – Definition, Formula and the ROC Trading Strategies
The sleeping state is characterized by a flat, the formation of an accumulation zone, as large traders are adding up to the trades. Research led the trader to the conclusion that the market is chaos and trading is a psychological game. Knowing the psychology and understanding the principles of behavior of market participants, the zones of accumulation and the price’s exit points from these zones are determined. This is a similar idea to when you are using the moving average in trend following. Similarly, a bearish trend xtb review will remain if it is on the right side of the chart. As such, you should start exiting when the price moves towards the lips of the indicator.
Let’s continue to study Trading Chaos by Bill Williams(BW). He divided 5 levels of proficiency from the beginner to the trader-expert. Candlesticks is the beginning of the beginner level but this knowledge is necessary for the successful trading. Figure 1 You can see here the bar structure, the open, low, close and high of the bar. Today it’s time to consider the Awesome Oscillator, the indicator introduced by Bill Williams in his book “Trading Chaos”. A lot of crypto trading strategies use this indicator.
It is a sell signal in the Alligator trading strategy. When the green balance line is above the red one and the red is above the blue, and the price is trading above all the Alligator lines, a buy signal is generated. It is the first to react to the changes in the balance of buyers and sellers in the price chart. When the lip line crosses slower MAs, we could assume that the trend is about to start.