The Alligator Indicator is a trend-following technical analysis tool that uses three moving averages to identify trends in the market. The three moving averages are known as the Jaw, Teeth, and Lips of the Alligator. The Jaw is a 13-period moving average that is shifted forward by 8 bars. The Teeth is an 8-period moving average that is shifted forward by 5 bars. The Lips is a 5-period moving average that is shifted forward by 3 bars. The Alligator Indicator is designed to help traders identify when a trend is forming and what the direction of that trend is. It can also be used to identify the absence of a trend.
Who Created The Alligator Indicator?
The Alligator Indicator was created by Bill Williams, a renowned trader and author of several books on trading psychology and technical analysis. Williams was a pioneer in the field of trading psychology and developed several technical analysis tools that are widely used by traders today.
Why Is The Alligator Indicator Important?
The Alligator Indicator is important because it helps traders identify when a trend is forming and what the direction of that trend is. This information is critical for traders who want to make profitable trades in the financial markets. The Alligator Indicator is also important because it can be used to identify the absence of a trend, which can be just as valuable as identifying a trend.
What Are The Benefits Of Using The Alligator Indicator?
The benefits of using the Alligator Indicator include:
- Identifying trends in the market
- Identifying the direction of the trend
- Identifying the absence of a trend
- Providing clear entry and exit signals
- Helping traders make profitable trades
What Are The Drawbacks Of Using The Alligator Indicator?
The drawbacks of using the Alligator Indicator include:
- False signals in ranging markets
- Lagging behind the price action
- Not suitable for all market conditions
How Does The Alligator Indicator Work?
The Alligator Indicator works by using three moving averages to identify trends in the market. The Jaw, Teeth, and Lips of the Alligator are used to identify the direction of the trend. When the Jaw is above the Teeth and the Teeth is above the Lips, the market is in an uptrend. When the Jaw is below the Teeth and the Teeth is below the Lips, the market is in a downtrend. When the Jaw, Teeth, and Lips are intertwined, the market is in a ranging phase.
How to Trade with Alligator Indicator
Buy Entry
- Wait for the Alligator’s three lines to cross above the price chart, indicating an uptrend.
- Enter a long position when the price breaks above the most recent high.
- Place a stop-loss order below the most recent low.
- Set a take-profit order at a level that is at least twice the distance between the entry point and the stop-loss level.
Sell Entry
- Wait for the Alligator’s three lines to cross below the price chart, indicating a downtrend.
- Enter a short position when the price breaks below the most recent low.
- Place a stop-loss order above the most recent high.
- Set a take-profit order at a level that is at least twice the distance between the entry point and the stop-loss level.
Alligator Indicator Settings
Conclusion
Alligator Indicator is a popular tool used by traders to identify trends and their direction in the forex market. When using the Alligator Indicator for MetaTrader 4 to enter buy and sell positions, it is important to wait for the Alligator’s three lines to cross above or below the price chart, indicating an uptrend or downtrend, respectively.
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Alligator – indicator for MetaTrader 4