Chaos Alligator
Definition
Chaos Alligator indicator (or Williams Alligator) is a trend-following technical analysis tool based on the idea that financial markets and individual securities usually trend at a lower rate than sideways ranges. The indicator was developed with the thought in mind that both institutions and individuals generally collect more profit when a market is trending strongly. The study uses smoothed Moving Averages to analyze market trends and potential turning points.
Chaos Alligator was first introduced by a well-known trader and author Bill Williams.
The Williams Alligator indicator uses the Simple Moving Average (SMA) indicator in its calculation to add more smoothed averages to the result that generally slow down indicator turns.
The indicator uses three smoothed Moving Averages (MAs) set at periods that are Fibonacci numbers: five, eight, and 13.
The three Moving Averages that are used comprise the Alligator in three major ways: the Jaw, the Teeth, and the Lips/Mouth. These components open and close depending on their subsequent reaction to evolving trends and trading ranges alike. Let’s dig a little deeper into each function of the Williams Alligator indicator.
- The Jaw. The Alligator’s jaw is projected as a blue line and begins with the 13-bar SMMA. The line is smoothed by eight bars on its following values.
- The Teeth. The Alligator’s teeth are projected as a red line and begin with the eight-bar SMMA. The line is smoothed by five bars on its following values.
- The Lips/Mouth. The Alligator’s lips/mouth are projected as a green line and begin with the five-bar SMMA. The line is smoothed by three bars on its following values.
The Jaw of the Alligator inherently makes the slower turns, whereas the Lips/Mouth of the indicator make the faster turns.
Default Inputs
Jaw = 7 by default.
JawOffset = 8 by default.
Teeth = 8 by default.
TeethOffset = 5 by default.
Lip = 5 by default.
LipOffset = 3 by default.
Value sets the formula (high+low)/2.
