What Is Williams Alligator Indicator?

Bill Williams, a legendary Forex trader, developed the Williams Alligator technical analysis indicator in 1995. He had assigned his identity to the predictor. He also invented several other leading metrics that are still used by traders nowadays. The Williams Fractal, Awesome Oscillator, and Accelerator/Decelerator Oscillator are examples of these markers. 

We’ll further discuss - what is Williams Alligator Indicator? How it works, the formula used, tips, and common mistakes traders make.

The Alligator indicator is based on the assumption that capital markets and individual shares only trend 15-30% of the time. According to the developer, individuals and institutions make the majority of their earnings during times of heavy trending.

The Alligator is a metaphor as well as a predictor. The indicator is made up of three lines that are overlaid on a pricing map. They represent the beast's jaw, teeth, and lips.

Bill Williams developed it to help traders validate the existence and trajectory of a pattern. Traders may use the sensor to identify impulse and correction wave formations. However, it is most effective when combined with a momentum indicator.

The Alligator has a variety of "traits." When the three lines are combined, the Alligator's mouth drops, and traders believe it is asleep. It becomes hungrier by the minute as it rests, anticipating the moment when it will wake up and feed.

Once the pattern emerges, the Alligator awakens and starts to feed. It seals its mouth and goes back to sleep when it is finished.

Three smoothed moving averages, set at 5, 8, and 13 times, are used in the Alligator indicator. Using a simple moving average, calculate the first smoothed average, then apply smoothed averages to delay the indicator's turns.

The indicator's founder was a forerunner in the field of financial market psychology. He created some of today's most popular technical indicators. The Williams Alligator predictor can be used to detect the lack of a pattern, trends that are only beginning to emerge, and markets that have already begun to trend. Technical traders can use this knowledge to determine when to enter or exit a market.

He built the indicator based on the rule that the asset could trend 15 to 30% of the time. 

The founder was confident that the former is where the majority of institutional traders book their earnings. Furthermore, the Alligator indicator's moving averages may also serve as dynamic resistance or assistance. Based on which direction the lines cross, you can use it as a buy or sell signal even whether the candlesticks close above or below the indicator's points.

Technical traders may use the Alligator predictor to identify impulse and corrective wave formations. However, it is most effective when used in conjunction with a momentum indicator.

These three stages make up the estimation formula series:

When the three lines – Jaw, Teeth, and Lips – cross and break, the indicator gives a warning. They indicate a shift in the pattern. As the three lines diverge significantly, a clear pattern shows that the Alligator's mouth is being fed. This situation, according to Williams.

However, as the three lines begin to narrow and converge, it indicates that a pattern is slowing and may soon change. It also indicates that a significant change is on the way.

Traders can then look for a cross between the blue and green lines. They often wait for a candle to close through the indicator's lines before taking action.

Here are traders' tips and basic errors to prevent while using the Alligator indicator:

The Williams Alligator predictor is a technical analysis instrument that is both dynamic and beneficial. Traders may use it on various financial instruments, including Forex, stocks, equity indexes, and cryptocurrencies. Using equipment like the Williams Alligator and stop-loss security, traders can increase their income easily, comfortably, and with very little initial cash.