Alligator and Gator

The Alligator

Bill Williams describes the Alligator as being like a compass which keeps your trading in the right direction. The Alligator helps you spot a real trend and stay out of range-bound trading, which always result in losses. The Alligator is the combination of three balance lines:

Alligator's Jaw (the blue line) - 13-period moving average at the mid price (High+Low)/2, which is offset 8 bars into the future;

Alligator's Teeth (the red line) - 8-period moving average at the mid price (High+Low)/2, which is offset 5 bars into the future;

Alligator's Lips (the green line) - 5-period moving average at the mid price (High+Low)/2, which is offset 2 bars into the future.

In order to build the Alligator in MetaTrader 4 use the "Insert -> Indicators -> Bill Williams – Alligator" menu sequence.

If all three lines are intertwined, the Alligator is asleep and the market is range-bound. The longer it sleeps, the hungrier it gets. When it wakes up from a long sleep it chases the price much farther, therefore price movements are much stronger. When the Alligator is asleep, stay square. Once the Alligator wakes up, it opens its mouth (Balance lines diverge) and starts hunting. Having eaten enough, it goes to sleep again (Balance Lines converge), so it's time to fix profits.

If the Alligator is not asleep, the market is either uptrending or downtrending:

• if the price is above the Alligator's mouth then it's an uptrend;
• if the price is below the Alligator's mouth then it's a downtrend.

The Alligator also helps to determine the character of the Elliot waves:

• if the price is outside the Alligator's mouth the wave is impulsive;
• if the price is inside the Alligator's mouth the wave is corrective.

The formula for the Alligator:

MIDPOINT PRICE = ( HIGH + LOW ) / 2

ALLIGATOR'S JAW = SMMA ( MIDPOINT PRICE, 13, 8 )

ALLIGATOR'S TEETH = SMMA ( MIDPOINT PRICE, 8, 5 )

ALLIGATOR'S LIPS = SMMA ( MIDPOINT PRICE, 5, 3 )

Where:

• HIGH - the highest bar price;
• LOW - the lowest bar price;
• SMMA (A, B, C) - smoothed moving average (A - smoothed data, B - smoothing period, C - move into the future),
• ALLIGATOR'S JAW - blue line;
• ALLIGATOR'S TEETH - red line;
• ALLIGATOR'S LIPS - green line.

The Gator Oscillator

The Gator Oscillator shows the degree of convergence / divergence of the Balance Lines:

In order to build the Gator Oscillator in MetaTrader 4 follow the "Insert -> Indicators -> Bill Williams - Gator Oscillator" menu sequence.

The Gator Oscillator is displayed as two histograms:

• the histogram above zero shows the distance between the blue and the red lines (between the Alligator's jaw and teeth);
• the histogram below zero shows the distance between the red and the green lines (between the Alligator's teeth and lips).

All the bars of each histogram are either green or red:

• histogram bar is red if it is lower than the preceding one;
• histogram bar is green if it is higher than the preceding one.

The Gator Oscillator clearly shows convergence and intertwining of the Balance Lines when the Alligator is asleep or awake thus helps identify a trend.