# Williams Alligator Indicator Guide

Alligator indicator for MT4 is a popular technical indicator invented by the iconic Forex trader “Bill Williams”. In fact, he is composed of 3 smoothed moving averages. So it provides more robust and better trading signals than many other one-line indicators. Each MA line represents a part of the ”Alligator mouth”; lips, teeth, and jaw. However, the williams alligator MT5 indicator is good at determining tendencies, their direction, and timing to open orders. Though, the MT4 Williams alligator indicator is basically useless during high volatility and sideways conditions. Accordingly, he focuses on the recent behavior of the Forex market instead of looking at past behavior to determine future results. Also, to identify trading signals, the Williams alligator strategy depends on convergence-divergence relationships between MAs.

## What is alligator indicator ?

The Williams alligator nomination is metaphoric because it symbolizes the mouth of the alligator. Actually, this indicator is a mixture of balanced moving averages that employs fractal geometry and nonlinear dynamics. It consists of three lines, overlaid on the pricing chart, that defines the jaw, teeth, and lips of the beast. However, the three smoothed MAs; lips, teeth, and jaw of the alligator display the interaction of different time periods. That is why we consider the Williams alligator strategy as a lagging indicator. In fact, most of the time the market remains stationary where sideways conditions evolve from 70% to 85% of the time. As clear tendencies can be noticed only 15% to 30% of the time, it is essential to pursue them. At this point, ”Bill Williams” suggests using the williams alligator indicator to identify market tendencies and also to determine price direction.

## Alligator formula

This indicator uses three smoothed MAs. They are set at 5, 8, and 13 periods. We calculate the first smoothed MA as an SMA (Simple moving average).

-Median price = [(high + low)/2]

-SUM1 = SUM (close, N); the SUM of closing prices for N periods

-SMMA1 = SUM1 / N; smoothed moving average of the first bar

-PREVSUM = SMMA (i-1)*N;  smoothed SUM of the previous bar

-SMMA (i) = [PREVSUM – SMMA(i-1) + close (i)]/N ; smoothed moving average of the current bar except for the first one.

you can attach the  alligator indicator to charts directly from the indicator list as it is available by default on Metatrader platforms, also on the Tradingview.

## How to use alligator indicator in forex trading ?

Actually, we mention in the previous part, that the MT5 indicator is a combination of three smoothed moving averages :

• The blue line: the alligator’s Jaw: is a 13-period smoothed MA of the median line, that we move into the future by 8 bars.
• The red line: the alligator’s Teeth: is an 8- period smoothed MA of the median line, pushed by 5 bars.
• The green line: the alligator’s lips: is a 5-period smoothed MA of the median line, that we push by 3 bars into the future.

Thus, the indicator involves convergence-divergence relationships on the smoothed Moving Averages to produce trading signals with the Jaw producing the slowest moves and the lips producing the fastest moves.

## How do you read Alligator indicator ?

According to ”Bill Williams”, using this indicator can deliver three main clues to Forex traders. He often resembled features of the indicator to animals, so he referred to:

• Sleeping alligator: when the green, red and blue lines are very close to each other. In this case, we should avoid trading because the Forex market lacks a trend.
• Awakening alligator: is when the red and blue MAs are going in the same direction, the green passes through them, and all three end up heading in the same orientation, indicating to the trader that a tendency is about to formate.
• Hungry alligator: is when the green line is above the red line and the red line is above the blue line, there is an up movement. Otherwise, there is an upcoming downtrend when the order of the lines is inverted (blue top, red middle, green bottom).

Hence, it is very important to understand that the sleeping period (absence of a tendency) will prepare for the hunting period (existence of a tendency. So, the longer the beast rests the hungrier it becomes. Consequently, a stronger momentum will happen in the markets.

### Alligator Strategy examples

The Williams alligator strategy is about consolidation zones and breakout. The longer the alligator rests, denotes the longer the Forex market is consolidating. Thus after a long consolidation, the breakout is usually bigger. As a matter of fact, most Forex traders avoid consolidation phases and focus on detecting breakouts through spotting lines expansion and contraction. Thus, this williams alligator strategy will confirm price tendencies and also provide better trading opportunities.

In fact, it is better to not use the MT4 williams alligator indicator alone. Generally, Forex traders use the MACD, RSI, or Stochastic along with him to ensure the buy or sell decisions. Also to guarantee an effective williams alligator strategy.

The alligator indicator for MT4 works by drawing diverse smoothed moving averages on the pricing Metatrader 4 chart. In fact, it employs three MAs, where each one represents a part of the ‘alligator’. However, counting on this MT4 indicator implies that we should respect 2 major rules:

-Firstly, when the lines go on in an uptrend direction (green leads, red and blue follow), then, this shows an occurring up movement. So, a signal to buy and we should take a long position.

-Secondly, when the MAs of the MT4 indicator follow each other in the reversed order, then, this reveals a sign of an upcoming down movement. So this signifies that it would be quite reasonable to take a short position at this moment.