How To Tame A Reptile or Williams Alligator From Scratch
Hi, traders!
Have you ever heard about Alligator? Not from Australia or America but Williams Alligator. Both Australian reptile and Williams ‘pet’ have some common – they all have Jaw, Teeth, and Lips. So what is Williams Alligator?
As you know, you can get maximum profit during trend markets. You gonna enter to longs or shorts, to take some profit. It’s obvious that trading on choppy (sideways) market can be very dangerous for your funds. Thus, there’s the reasonable question, are you sure that the market has trend. Genius trader Bill Williams was concerned about the problem. That’s why he invented such pretty tool to define if market is trendy or choppy. It’s the first Alligator that’ll help you to earn money, but not spend them in boutiques.
So, let’s speak about technical part. The Alligator indicator uses three smoothed moving averages(calculated with a simple moving average), set at 5, 8, and 13 periods, which are all Fibonacci numbers. The initial smoothed average is calculated with a simple moving average (SMA), adding additional smoothed averages that slow down indicator turns.
The three moving averages comprise the Jaw, Teeth, and Lips of the Alligator, opening, and closing in reaction to evolving trends and trading ranges:
1. Jaw (blue line): Starts with the 13-bar SMMA and is smoothed by eight bars on subsequent values.
2. Teeth (red line): Starts with the eight-bar SMMA and is smoothed by five bars on subsequent values.
3. Lips (green line): Starts with the five-bar SMMA and smoothed by three bars on subsequent values.
The indicator applies convergence-divergence relationships to build trading signals, with the Jaw making the slowest turns and the Lips making the fastest turns. The Lips crossing down through the other lines signals a short sale opportunity while crossing upward signals a buying opportunity. Williams refers to the downward cross as the alligator "sleeping" and the upward cross as the alligator "awakening."
The three lines stretched apart and moving higher or lower denote trending periods in which long or short positions should be maintained and managed. This is referred to as the alligator "eating with mouth wide open." Indicator lines converging into narrow bands and shifting toward a horizontal direction denote periods in which the trend may be coming to an end, signaling the need for profit-taking and position realignment. This indicates the alligator is "sated."
The indicator will givefalse positives when the three lines are crisscrossing each other repeatedly, due to choppy market conditions. According to Williams, the alligator is "sleeping" at this time. Remain on the sidelines until it wakes up again. This exposes a significant drawback of the indicator because many awakening signals within large ranges will fail, triggering whipsaws.
Have you ever heard about Alligator? Not from Australia or America but Williams Alligator. Both Australian reptile and Williams ‘pet’ have some common – they all have Jaw, Teeth, and Lips. So what is Williams Alligator?
As you know, you can get maximum profit during trend markets. You gonna enter to longs or shorts, to take some profit. It’s obvious that trading on choppy (sideways) market can be very dangerous for your funds. Thus, there’s the reasonable question, are you sure that the market has trend. Genius trader Bill Williams was concerned about the problem. That’s why he invented such pretty tool to define if market is trendy or choppy. It’s the first Alligator that’ll help you to earn money, but not spend them in boutiques.
So, let’s speak about technical part. The Alligator indicator uses three smoothed moving averages(calculated with a simple moving average), set at 5, 8, and 13 periods, which are all Fibonacci numbers. The initial smoothed average is calculated with a simple moving average (SMA), adding additional smoothed averages that slow down indicator turns.
The three moving averages comprise the Jaw, Teeth, and Lips of the Alligator, opening, and closing in reaction to evolving trends and trading ranges:
1. Jaw (blue line): Starts with the 13-bar SMMA and is smoothed by eight bars on subsequent values.
2. Teeth (red line): Starts with the eight-bar SMMA and is smoothed by five bars on subsequent values.
3. Lips (green line): Starts with the five-bar SMMA and smoothed by three bars on subsequent values.
The indicator applies convergence-divergence relationships to build trading signals, with the Jaw making the slowest turns and the Lips making the fastest turns. The Lips crossing down through the other lines signals a short sale opportunity while crossing upward signals a buying opportunity. Williams refers to the downward cross as the alligator "sleeping" and the upward cross as the alligator "awakening."
The three lines stretched apart and moving higher or lower denote trending periods in which long or short positions should be maintained and managed. This is referred to as the alligator "eating with mouth wide open." Indicator lines converging into narrow bands and shifting toward a horizontal direction denote periods in which the trend may be coming to an end, signaling the need for profit-taking and position realignment. This indicates the alligator is "sated."
The indicator will givefalse positives when the three lines are crisscrossing each other repeatedly, due to choppy market conditions. According to Williams, the alligator is "sleeping" at this time. Remain on the sidelines until it wakes up again. This exposes a significant drawback of the indicator because many awakening signals within large ranges will fail, triggering whipsaws.
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