The Good way to use Williams Alligator Indicator
The legendary trader Bill Williams, created this Alligator Indicator to find the trend in the market. He said, more than 70 percent of the time, the financial market ranges sideways, and trends only 15 to 30 percent of the time. Williams believed that institutional brokers make most money in a strong trending markets. And I'm sure most traders will agree.
This Alligator indicator, is a trend following indicator, and is used to find the Trend direction of a stock or Forex pair. Here's how the Alligator indicator works. When the price is above all the three lines of the alligator, the market is considered to be in an uptrend. Similarly, when the price is below the alligator indicator, the market is considered to be in a down trend.
Furthermore, the three lines, the Jaw, teeth, and lips, work very similar to the mouth of a real life alligator.
If the Jaw, teeth, and lips lines are far away from each other, the market is considered to be in a trend. When these lines are far away, You can also say that the mouth of the alligator is open, and the alligator is awake.
Similarly, when The Jaw, teeth, and lips are close to each other, the market is considered to be in a range. In other words, there is no trend going on. You can say that the alligator is sleeping, since the mouth of the alligator is kind of closed.
And since Bill Williams said, most money is made when market is in a strong trend, you can easily use this indicator to find and avoid range markets.
So, here's how the complete Williams Alligator Trading Strategy Goes.
If price is above all alligator lines, the mouth of the alligator is open, and alligator is awake. And since the alligator is awake, and price is above the alligators mouth, the price is considered to be in an uptrend. The strength of the trend is determined by how far the alligator lines are from each other. If all three lines are far away from each other, there is a strong trend going on. If they are not that far, a decent trend is going on.
On the other hand, If the Alligator lines are close to each other, Market is considered to be in a range. It means, there is no trend going on, and you should avoid taking any positions. You can also say, that the alligator is sleeping. Most new traders lose money in the range markets. You can use this indicator to identify a sideways market to avoid losing money.
Now that we understand how to identify trending and ranging markets using the Williams Alligator Indicator, lets see how some traders use this indicator as an entry signals generator.
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Video 1 of 2 - In this Forex training video we discuss the characteristics of the double top and the surrounding market conditions you should consider. Before you learn how to trade the double top you must know how to identify the pattern. Watch the next video to learn how to trade the double top.
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Attachment 43651
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