What Is the Alligator Indicator?
Bill Williams created the Alligator indicator, a technical analysis tool that aids in determining the existence and direction of market trends. To assist in identifying trend movement, it employs three smoothed moving averages (SMMAs) defined at three Fibonacci-based periods: 13, 8, and 5.
Learn About Lagging indicators
Each moving average period is identified using the following labels and color codes:
- Jaw. Slowest moving average (13-period) is color-coded blue
- Teeth. Medium moving average (eight-period) is color-coded red
- Lips. Fastest moving average (five-period) is color-coded green
Each one is offset forward (into the future) to indicate convergence/divergence relationships.
In order to show the relationships of convergence and divergence, each one is offset forward, or into the future.
Williams developed this indicator based on the idea that sideways or nontrending movements make up the remaining periods, with trends occurring only 15% to 30% of the time. As a result, the Alligator was created to indicate when a fresh trend was “awakening” from its “sleeping,” or non-trending, state.
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