Bill Williams indicators
Alligator
Three smoothed averages (jaw, teeth and lips) shifted into the future: when they are tangled the "alligator sleeps" (no trend); when they fan out, it "eats" (trend).
The idea in plain words
Markets trend only part of the time. The three lines, each slower and shifted further forward, help you see whether the market is resting or moving, and in which direction.
How it is calculated
Smoothed moving averages of the median price (high + low) ÷ 2: Jaw 13 periods shifted 8 candles, Teeth 8 shifted 5, Lips 5 shifted 3.
Jaw = SMMA(median, 13) shifted 8 forward (blue)
Teeth = SMMA(median, 8) shifted 5 forward (red)
Lips = SMMA(median, 5) shifted 3 forward (green)How to use it
- Lines intertwined: no trend, wait.
- Lips above Teeth above Jaw, all rising and spreading: uptrend; the reverse order: downtrend.
- Exit or tighten stops when the lines start to converge again.
Drawing conclusions
- The wider the gap between the lines, the stronger the trend.
Example
After a week of tangled lines on GBPUSD H4, the green line crosses above red and blue and the three fan out upward: the alligator wakes up hungry.
Prices in examples are illustrative.
Watch out for
- The lines are slow; part of every trend is gone by the time they fan out.
A little history
Bill Williams, "Trading Chaos" (1995).
Educational content only. No indicator or pattern predicts the future, and nothing here is investment advice.