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    Alligator

    Definition

    The Alligator Study is a technical analysis tool created by Bill Williams, designed to help traders identify emerging trends. It consists of three smoothed moving averages: the Jaw (usually a 13-period smoothed moving average), the Teeth (an 8-period smoothed moving average), and the Lips (a 5-period smoothed moving average). These three lines are shifted into the future by different amounts and represent various time frames.

  • Jaw: Represents the long-term trend and is often depicted in blue.
  • Teeth: Represents the medium-term trend and is usually colored red.
  • Lips: Represents the short-term trend and is typically green.

    • When these lines intertwine, the Alligator is said to be "sleeping," indicating a non-trending market. When the lines diverge, the Alligator is "awake," signaling a potential emerging trend.

    Suggested Trading Use

    Traders can use the Alligator Study to understand whether a market is trending or ranging and to detect possible entry and exit points. When the Lips cross above the other lines, it may indicate the beginning of an upward trend (buy signal). Conversely, when the Lips cross below the other lines, it could signal the start of a downward trend (sell signal).