What is the Alligator?
The Alligator, which many traders refer to as the “Alligator,” was created and developed by Bill Williams and can be used on both MT4 and MT5 platforms.
It indicates the trend and direction of the price and can also identify the market trend by filtering out the best signals for us.
The Alligator consists of three lines:
The green line (the Alligator’s lips) — a 5-period smoothed moving average
The red line (the Alligator’s teeth) — an 8-period smoothed moving average
The blue line (the Alligator’s jaw) — a 13-period smoothed moving average
Bill Williams referred to these moving averages as the “balance lines.” You can see that he creatively named the indicator and its components. His concept was to provide an example that demonstrates market behavior — this example being the Alligator alternating between periods of sleeping and hunting.
How to activate the Alligator indicator
You can activate it in MT4 by going to Insert > Indicator > Bill Williams > Alligator.
You can use the default setting of Period 13 as preset by the system.
When we open the Alligator indicator, three lines will appear: green, red, and blue. We use these three lines to interpret the signals.
How to use the Alligator
There are several ways to interpret the Alligator, but mainly it is used to identify the price trend—whether the price is trending upwards or downwards at a given time. For example,
You can see that the green line crosses above the red and blue lines. This indicates that there is a chance of an uptrend. If the green line remains above the red and blue lines and the lines are spread apart quite a bit, it may suggest that the uptrend is strong. Traders can use this signal as a point to look for a Buy order entry.
On the other hand, if the green line crosses down below the red and blue lines, it means there is a chance the price will enter a downtrend. Traders use this as a signal to decide when to exit or enter orders. If all three lines are spread apart quite a bit, it may indicate that the downtrend is strong, and traders can use this signal as a point to look for a Sell order.
When the chart is trending up or down, traders often call this the “Alligator hunting prey,” as it represents the alligator opening its mouth to catch prey. However, if the chart is in a sideways range, traders usually say the “Alligator is sleeping” because the price is not moving decisively in either direction.
The Alligator indicator is a very useful tool for identifying trends, and many traders pay close attention to it and use it frequently. But remember, every investment carries risk, and indicators are not always perfectly accurate. I recommend planning your trades carefully, possibly combining this indicator with others to make better decisions or waiting for high-confidence opportunities before placing orders.
