Chaos Alligator: Difference between revisions
Line 8: | Line 8: | ||
* '''Jaw''' is a blue line that begins with the 13-bar SMMA and shifted forward by 8 bars. | * '''Jaw''' is a blue line that begins with the 13-bar SMMA and shifted forward by 8 bars. | ||
* '''Teeth''' are a red line that begins with the 8-bar SMMA and shifted forward by 5 bars. | * '''Teeth''' are a red line that begins with the 8-bar SMMA and shifted forward by 5 bars. | ||
* '''Lips/Mouth'''are a green line that begins with the 5-bar SMMA and shifted forward by 3 bars. | * '''Lips/Mouth''' are a green line that begins with the 5-bar SMMA and shifted forward by 3 bars. | ||
The Jaw of the Alligator inherently makes the slower turns, whereas the Lips/Mouth of the indicator make the faster turns.<br> | The Jaw of the Alligator inherently makes the slower turns, whereas the Lips/Mouth of the indicator make the faster turns.<br> |
Revision as of 16:36, 21 May 2024
Definition
Chaos Alligator indicator (or Williams Alligator) is a trend-following technical analysis tool introduced by a well-known trader and author Bill Williams. It is 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.
Components
To analyze market trends and potential turning points, the Williams Alligator indicator uses smoothed moving averages set at periods based on Fibonacci numbers: 13, 8, and 5. They are Jaw, Teeth, and Lips/Mouth correspondingly.
- Jaw is a blue line that begins with the 13-bar SMMA and shifted forward by 8 bars.
- Teeth are a red line that begins with the 8-bar SMMA and shifted forward by 5 bars.
- Lips/Mouth are a green line that begins with the 5-bar SMMA and shifted forward by 3 bars.
The Jaw of the Alligator inherently makes the slower turns, whereas the Lips/Mouth of the indicator make the faster turns.
These components open and close depending on their subsequent reaction to evolving trends and trading ranges alike.
How to interpret results
- When the three lines are intertwined, the market is in a resting or consolidating phase, often referred to as the "Alligator is sleeping."
- When the lips (green line) crosses over the teeth (red line) and jaw (blue line), "the Alligator is waking up" and a new trend might be starting.
- When the lines are fanning out and moving in the same direction, it suggests a strong trend, indicating that "the Alligator is eating".
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.