A trader needs to learn the market’s structure, and trade according to it. This is a sleeping or sideways phase, and most traders should stay away. At the far right of the chart, the alligator is opening its mouth again or awakening, signaling a downtrend. The indicator will flash false positives when the three bill williams trader lines repeatedly crisscross each other due to choppy market conditions. According to Williams, the alligator is “sleeping.” You’re to remain on the sidelines until it wakes up. This exposes a significant drawback of the indicator because many awakening signals within large ranges will fail, triggering whipsaws.
Ok, these results don’t look very good, but this strategy seems to work on other time periods, so, we will keep this strategy and try to get better results adding other indicators or/and adding predictions. If the green line is over red and over blue, there is an uptrend; if the green line is under red and under blue, this means a downtrend. Both situations mean it’s the perfect moment to enter the market. So, in sleep phase, lines tend to be close to each other and move sideways.
Practical Examples of Using the Williams Alligator Indicator
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He began working with professional traders and developed training programs for new traders at Kingstree Trading. He wrote a series of books on performance trading and developed methods to measure market trends, momentum, and trading activities. He also shares his daily trading strategies on his Traderfeed blog. The famous American trader and author, Bill Williams, developed several technical indicators that traders today use to analyze market movements. These include the Awesome Oscillator, the Alligator indicator, the Fractals Indicator, and the Market Facilitation Index.
What Other Indicators Can Be Used With the Williams Alligator?
- At the far right of the chart, the alligator is opening its mouth again or awakening, signaling a downtrend.
- The saucer strategy is also used to identify potential trend reversal in the forex market.
- His daughter, Justine Williams Lara, continues his legacy of teaching traders and continues to follow his passion.
- The best time depends on how it fits with your overall strategy.
To study the market, he suggested certain indicators, which we will study in this article. A visionary like Bill Williams also had the ability to develop trading systems that would work for any trader. He devoted his life to teaching others and developed a unique trading methodology. Bill’s daughter, Justine, carries on his legacy by teaching traders the Bill Williams methods and concepts.
How to use Fibonacci Retracement to Enter a Trade in the Forex Market
- As mentioned earlier, MT4 and MT5 include the suite of Bill Williams indicators in a very easy to get to indicators tab.
- This is a sleeping or sideways phase, and most traders should stay away.
- Please note this image is a representation only and is not provided as general or personal advice.
- The MFI is calculated by multiplying the volume of trades by the difference between the current and previous price and then dividing that number by the total volume of trades.
- This indicator helps traders determine which trends are real and which ones are just fake.
- The second bar represents the start of the bearish trend, where selling pressure is building up, and the third bar represents a continuation of the bearish trend.
The AO identifies momentum by calculating the difference between the 34 period and 5 period simple moving averages. The Alligator Indicator is created by using three smoothed moving averages (SMA). The first SMA is set at five, the second at eight and last at 13. The three lines stretched apart and moving higher or lower denote trending periods in which long or short positions should be maintained and managed.
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Traders shouldn’t think about the market’s chaos as something negative. Williams calls chaos a higher form of order, governed not by cause and effect, but by randomness. The market follows a path of least resistance, defined by a hidden structure, like the flow of a river depends on the underlying structure of the riverbed.
The psychology behind fractals is that they reflect key points of support and resistance. Traders identify these points to anticipate changes in direction based on the collective behavior of market participants. In this post we will look at who exactly Bill Williams the trader is, the books he wrote and the famous indicators he created.
How to Use Bill Williams Indicators in MT4 / MT5
As an example of strategies based on Bill Williams indicators, we can use crosses of AO from positive to negative and vice versa. You can try more possibilities and modify the code as you want. Please leave a comment in the article discussion if you managed to get much better results over the same periods used in the MetaTrader 5 Strategy Tester. Fractals identify possible points where the market may change direction.
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Using fractals, you can apply Fibonacci retracements or extensions to the price movement. Another benefit of fractals is that they are often used in conjunction with other technical analysis tools. A fractal-based trading strategy can yield positive results for a very long time. Bill Williams is credited with the invention of fractals, which have become indispensable assistants for Forex traders. He first used the concept of fractals in his 1995 book, “Trading Chaos,” and it has since become a widely-used tool for stock market analysis and trading. Since then, fractals have gained the most popularity as an indicator within the MetaTrader 4 trading terminal.