Williams Alligator is a technical indicator created by renowned trader Bill Williams based on several of his successful systems and strategies. The basis of this indicator is that three moving averages with different market periods will make it easier for traders to trade. So what is the Alligator indicator? Today, I will guide you on how to use the Alligator indicator in Forex trading with the highest efficiency.
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What is the Alligator indicator?
This indicator is named Alligator because its behavior is similar to an alligator. An Alligator indicator consists of three parts: teeth, jaws, and lips. This indicator is used to help traders determine market movements and make decisions. Or you can use it to find the right time to enter the market.
On the price chart, the Alligator indicator is a set of 3 SMMAs:
+ Jaws (Blue line) = SMMA (Average price 13.8).
+ Teeth (Red line) = SMMA (Average price 8.5).
+ Lips (Green line) = SMMA (Average price 5.3).
How Alligator indicator works
Each shape of the Alligator indicator on the price chart tells us a unique state of the market.
(1) When the 3 SMMAs widen and go up and the alligator’s jaws open and yawn, the market is in an uptrend.
(2) When the 3 SMMAs widen and head down, the market is in a downtrend.
Although the way it works is simple, the signals given by the Alligator indicator are very accurate for forecasting the upcoming trend. That is why Alligator is very popular with trend-trading traders.
How to trade Forex effectively using the Williams Alligator indicator
Here, I will guide you on how to use the Alligator indicator to search for effective Forex transactions. Please stay tuned and follow to check the effectiveness of the Alligator indicator.
Strategy 1. Trade Forex by top/bottom fishing
This is a quite risky trading strategy when the signal to open orders is based on the Alligator indicator only. However, if the price goes according to your prediction, the profit will be maximum. You will catch the first waves in a new trend.
You open an order as follows:
Open a BUY order using the Alligator indicator:
+ Entry Point: When the 3 SMMAs widen and head up. The alligator jaws open and point up.
+ Stop-Loss: At the nearest support level before the price rebounds.
+ Take-Profit: You should take profits when the price touches resistance levels that have been formed in the past.
Open a SELL order using the Alligator indicator:
+ Entry Point: When the 3 SMMAs widen and head down. The alligator jaws open and point down.
+ Stop-Loss: At the nearest resistance level before the price drops again.
+ Take-Profit: You should take profits when the price touches support levels that have been formed in the past.
Strategy 2. Trade Forex following the trend
With this trading strategy, your orders are somewhat safer. You will use the Alligator indicator to confirm an ongoing trend before opening an order. However, this trading strategy requires you to wait patiently. You need to wait for the price retest when a trend occurs.
Open a BUY order when the Alligator indicator signals an uptrend (the 3 SMMAs extend and head up) as follows:
+ Entry Point: When the retest appears. The price will retest the support (which is the old resistance) after breaking out to form an uptrend.
+ Stop-Loss: At the nearest support level before the price retests
+ Take-Profit: You should take profits when the price touches resistance levels that have been formed in the past.
Open a SELL order when the Alligator indicator signals a downtrend (the 3 SMMAs extend and head down) as follows:
+ Entry Point: When the retest appears. The price will retest the resistance (which is the old support) after breaking out to form a downtrend.
+ Stop-Loss: At the nearest resistance level before the price retests
+ Take-Profit: You should take profits when the price touches support levels that have been formed in the past.
In conclusion
Above is just a basic guide on Forex transactions to get acquainted with the Alligator indicator. In the following articles, I will bring along some classic trading strategies with this indicator. Let’s follow it up. Goodbye and see you again.
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The post What Is The Alligator Indicator? How To Trade Forex Safely With It appeared first on How To Trade Blog.
source https://howtotradeblog.com/what-is-alligator-indicator-forex-trading/
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