The Alligator Indicator, developed by legendary trader Bill Williams, is a technical analysis tool that helps traders identify the presence of a trend and its direction. The indicator is composed of three moving averages (MA), which are lagging indicators that can be used to gauge momentum and determine potential areas of support and resistance. To help you understand the indicator. I am going to use the Olymp trade.
How to find and set Alligator Indicator on Olymp Trade?
You can start with the indicator at both Olymp Trade real and demo accounts. the first thing you need to do is log in to your account. and click the indicator box => Next click on the popular tab => Search and select Williams alligator from the list.
What is Williams Alligator Indicator?
The Alligator Indicator is a technical analysis tool developed by legendary trader Bill Williams that helps traders identify the presence and direction of a trend in the market. It consists of three components: the Balance Line (BL), Jaw (JW), and Teeth (TS). The BL is formed by calculating a Smoothed Moving Average (SMA) over a 13-period timeframe and shifting it 8 periods into the future. The JW is obtained by calculating an SMA over an 8-period timeframe and shifting it 5 periods into the future. Finally, the TS is calculated using a 5-period SMA shifted 3 periods into the future.
These three lines are designed to help traders identify different types of market trends, such as uptrends, downtrends, and consolidation phases. When all three lines are moving away from each other in a fan-like pattern, this usually indicates an uptrend or bullish sentiment in the market. Conversely, when all three lines are converging towards each other, it typically signals a downtrend or bearish sentiment in the market. During times when none of these patterns is present and all three lines remain flat for an extended period of time, this can signal a period of consolidation where traders should be cautious about taking any positions in either direction until further confirmation signals arise.
Alligator Indicator Calculation
The Alligator Indicator is calculated by combining three moving averages (MA) into one indicator. The first line, called the Balance Line, is created by taking a 13-period Smoothed Moving Average (SMA) and shifting it 8 periods into the future. The second line, called the Jaw (JW), is calculated by taking an 8-period SMA and shifting it 5 periods into the future. Finally, the third line, called the Teeth (TS), is obtained by taking a 5-period SMA and shifting it 3 periods into the future.
How to read Williams Alligator Indicator on Olymp trade chart
The indicator is made from three simple moving average lines Jaw, teeth, lips. Here, The Jaw is a blue line made from 13 SMA and 8 bar. The teeth is a red line made from 8 SMA and 5 bars. Last is the lips which is a green colour made from 5 SMA and 3 bars. Here, the lips is the fastest line and the Jaw is the slowest one. These three lines ribbons around the price that create buy and sell signals.
Identifying the bearish trend
When the three intersect each other and you find the blue followed by the red line and then the green line. This is the ideal scenario for a downtrend. the trend will be considered even stronger if there is a big gap between these lines.
Identifying the bullish trend
When the three lines intersect each other and you find the green line at the top following the red line and the blue line is the ideal scenario for a bearish trend. You can bid even stronger if there is a big gap between these three lines.
Overall, Alligator Indicator can be an effective tool for traders to use when assessing overall market conditions and determining potential areas for entry or exit points within their trades. It also can be used as part of a larger trading strategy along with other indicators such as MACD or RSI to validate any possible trading signals that may appear on their charts. In addition to helping traders identify different types of trends in the market, Alligator Indicators can also be used for other purposes such as determining potential entry or exit points for trades as well as confirming existing positions through additional analysis with other indicators like MACD or RSI. By combining multiple technical indicators together using different calculations and parameters, traders can gain deeper insight into potential trading opportunities and make more informed decisions when entering or exiting their positions accordingly.
You have just learned the Alligator indicator by now you have understood how easy it is to trade with this indicator and how powerful this indicator is. You can use a trend confirmator for better results. I would highly suggest you to combine this indicator with other indicators for trend confirmation at the Olymp Trade demo account and check how the combination works. If you are facing any issues in finding the right confirmator indicator do comment or contact me. I will help you. Till then best and I wish you a successful career 🙂