This is an accurate Alligator indicator based on the mid price and smoothed as Bill Williams specifies.
This Alligator is also projected into the future as Williams prefers.
Here is a screenshot of how the indicator looks:
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| Alligator Indicator |
Bill Williams describes the Alligator as being like a compass which keeps your trading in the right direction. The Alligator helps you spot a real trend and stay out of range-bound trading, which always result in losses. The Alligator is the combination of three balance lines:
Alligator’s Jaw (the blue line) – 13-period moving average at the mid price (High+Low)/2, which is offset 8 bars into the future;
Alligator’s Teeth (the red line) – 8-period moving average at the mid price (High+Low)/2, which is offset 5 bars into the future;
Alligator’s Lips (the green line) – 5-period moving average at the mid price (High+Low)/2, which is offset 2 bars into the future.
What the Alligator does?
The Alligator identifies trending & non-trending markets. It also specifies the direction of the trend.
Basic Rules
If all three lines are intertwined, the Alligator is asleep and the market is range-bound. The longer it sleeps, the hungrier it gets. When it wakes up from a long sleep it chases the price much farther, therefore price movements are much stronger.
When the Alligator is asleep, stay away.
If the Alligator is not asleep, the market is either uptrending or downtrending:
- if the price is above the Alligator’s mouth then it’s an uptrend;
- if the price is below the Alligator’s mouth then it’s a downtrend.
Once the Alligator wakes up, it opens its mouth (the three lines diverge) and starts hunting. Having eaten enough, it goes to sleep again (the three Lines converge), so it’s time to take profits.
Quick tips how to use "William Alligator"
Buy when candelstick is above the blue line (jaws) / Pass Jaws line.
Sell when candelstick is under / pass jaws line.
AFL: Alligator Indicator (to download afl click here) (download this afl file, unzip and paste it in custom folder under Formals in AmiBroker)
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