The Alligator indicator is a trend-following technical analysis tool developed by trader and author Bill Williams in 1995. It uses three smoothed moving averages — called the Jaw, Teeth, and Lips — to identify whether the market is trending or ranging, and to signal the likely direction of an emerging trend. When the three lines are intertwined, the market is considered “sleeping” (ranging). When they diverge and move apart, the Alligator is said to be “waking up” and eating — signalling a strong trend.
Introduction: Why the Alligator Indicator Matters
In any market, price spends a significant portion of time moving sideways — consolidating, drifting, and oscillating without a clear directional bias. Entering trades during these non-trending phases is one of the most common ways traders lose money. The Alligator indicator was specifically designed to solve this problem: to visually distinguish between trending and non-trending conditions, and to help traders avoid the trap of trading in a choppy, directionless market.
Bill Williams introduced the Alligator as part of his broader trading philosophy, described in his book Trading Chaos. He believed that financial markets mirror the fractal, non-linear patterns found in nature — and the Alligator’s design reflects that philosophy, using multi-period smoothed averages that are offset forward in time to capture the natural “rhythm” of the market.
Today, the Alligator is a standard built-in indicator on MetaTrader 4 (MT4) and MetaTrader 5 (MT5) — the two most widely used forex trading platforms in the world — making it accessible to millions of retail traders without any additional coding or customisation.
How the Alligator Indicator Works
The Alligator consists of three lines, each representing a smoothed moving average (SMMA) of the median price (calculated as the high plus the low, divided by two), applied over different periods and shifted forward by different amounts of bars.
The Three Lines Explained
Line | Name | Period | Shift | Colour (Default) |
Jaw | Alligator’s Jaw | 13-period SMMA | 8 bars forward | Blue |
Teeth | Alligator’s Teeth | 8-period SMMA | 5 bars forward | Red |
Lips | Alligator’s Lips | 5-period SMMA | 3 bars forward | Green |
The Jaw (blue line, slowest) represents the longest-term balance. It reacts the most slowly to price changes. The Teeth (red line) is the intermediate average. The Lips (green line, fastest) reacts most quickly to recent price action and is the first to respond when momentum shifts.
The forward shift applied to each line is what makes the Alligator different from a simple three-moving-average crossover system. Shifting the lines forward means they are plotted slightly ahead of the current bar, giving the indicator a predictive quality and reducing the lag traditionally associated with moving averages.
The Median Price Calculation
Instead of using closing prices, the Alligator uses the median price: (High + Low) / 2. This approach captures the midpoint of each candle’s range rather than just where it closed, which Bill Williams argued gives a more balanced representation of market activity.
Reading the Alligator: The Three Market States
The entire logic of the Alligator comes down to the spatial relationship between the three lines at any given point in time.
1. The Alligator Is Sleeping (Lines Intertwined)
When the Jaw, Teeth, and Lips are close together, overlapping, or crossing each other repeatedly, the Alligator is described as sleeping. This represents a sideways, range-bound, or consolidating market. During this phase, Bill Williams advised traders to stay out of the market entirely — there is no trend to trade, and attempting to do so typically results in whipsaw losses.
The longer the Alligator sleeps, the more hungry it becomes — and the more powerful the eventual breakout is likely to be when it wakes up.
2. The Alligator Is Waking Up (Lines Beginning to Diverge)
When the three lines start to spread apart, moving away from each other in a consistent order, the Alligator is waking up. This is the transition phase — the market is beginning to trend. Traders watch for the Lips to cross above the Teeth and Jaw (in an uptrend) or below them (in a downtrend) as an early signal that a new trend may be forming.
3. The Alligator Is Eating (Lines Wide Apart in Clear Order)
When all three lines are fully separated and moving in the same direction — with the Lips furthest from price in a downtrend, or closest to price in an uptrend — the Alligator is eating. This is the prime trending phase. Prices move strongly in one direction, and this is where the Alligator signals the highest-confidence trade opportunities.
In an uptrend: Lips (green) is above Teeth (red), which is above Jaw (blue). Price is trading above all three lines.
In a downtrend: Lips (green) is below Teeth (red), which is below Jaw (blue). Price is trading below all three lines.
4. The Alligator Is Satisfied (Lines Beginning to Converge Again)
When the three lines start to turn back toward each other after a prolonged trend, the Alligator is getting satisfied — the trend is losing momentum. This is a signal to consider tightening stop-losses or preparing to exit open positions.
Alligator Indicator Settings
The default settings for the Alligator are those originally specified by Bill Williams:
- Jaw: 13-period SMMA, shifted 8 bars forward
- Teeth: 8-period SMMA, shifted 5 bars forward
- Lips: 5-period SMMA, shifted 3 bars forward
These settings are appropriate for most major timeframes — from H1 (1-hour) charts up to the weekly chart. Some traders adapt the periods for shorter intraday timeframes (such as M5 or M15 charts), but the standard settings remain the most widely used because they were designed to capture meaningful market cycles across asset classes.
Trading Strategies Using the Alligator Indicator
Strategy 1: Basic Trend Entry
The most straightforward Alligator strategy involves entering a trade when the market transitions from sleeping to eating:
- Wait for the Alligator lines to converge (sleeping phase — patience is key here).
- Watch for the Lips to cross decisively above the Teeth and Jaw for a long entry, or below them for a short entry.
- Confirm that price is moving in the direction of the crossover.
- Enter the trade once the divergence between the three lines is clearly established.
- Exit when the lines begin to converge again (the Alligator getting satisfied).
Strategy 2: Alligator + Fractals
Bill Williams designed the Alligator to be used alongside his Fractals indicator — also a standard indicator on MT4/MT5. Fractals mark potential reversal points on charts as small up/down arrows above or below price bars. The combined signal works as follows:
- When the Alligator is awake and eating in an uptrend, only take long entries signalled by a Fractal breakout above the most recent up fractal.
- When the Alligator is awake and eating in a downtrend, only take short entries signalled by a Fractal breakout below the most recent down fractal.
- Avoid all Fractal signals when the Alligator is sleeping.
Strategy 3: Alligator + Awesome Oscillator
The Awesome Oscillator (AO) — another Bill Williams indicator — measures market momentum and can be used to confirm Alligator trend signals. When the Alligator shows an uptrend and the AO is positive and rising (green bars above the zero line), the trend signal is confirmed. When the AO diverges from the Alligator’s direction, caution is warranted.
Strategy 4: Alligator as a Filter
Rather than using the Alligator as a primary entry signal, many traders use it as a trend filter for other strategies. For example:
- Only take buy signals from RSI, MACD, or Stochastic when the Alligator is in an uptrend (Lips above Teeth above Jaw).
- Only take sell signals when the Alligator is in a downtrend (Lips below Teeth below Jaw).
- Ignore all signals — regardless of source — when the Alligator is sleeping.
Advantages of the Alligator Indicator
Trend clarity: The visual, colour-coded design makes it immediately obvious whether a market is trending or ranging — even for less experienced traders.
Multi-period context: By combining three different timeframes of moving average into a single visual tool, the Alligator gives a nuanced picture of market momentum that a single moving average cannot.
Versatility: The Alligator works on any timeframe and across all major asset classes — forex pairs, stock indices, commodities, and CFDs.
Reduces overtrading: The “sleeping Alligator” concept actively discourages entries during choppy conditions, which is one of the most valuable functions a trading tool can perform.
Built-in to MT4/MT5: No third-party download or custom coding required.
Limitations of the Alligator Indicator
Lagging indicator: Like all moving average-based tools, the Alligator reacts to price rather than predicting it. By the time the Alligator is clearly “eating,” a significant portion of the trend move may already have occurred.
Whipsaws in volatile markets: In markets with sudden, sharp price movements (such as during major economic news releases), the Alligator can generate false signals as lines temporarily cross and then revert.
Not suitable for ranging strategies: If you are specifically looking to trade range-bound markets or mean-reversion strategies, the Alligator’s design philosophy actively works against this — it is built for trend-following only.
Requires confirmation: Most professional traders do not use the Alligator as a standalone entry trigger. It is most effective when combined with at least one additional confluent signal or indicator.
The Alligator Indicator vs Other Moving Average Tools
Feature | Alligator | Simple Moving Average (SMA) | Exponential Moving Average (EMA) |
Number of lines | 3 | 1 (per indicator) | 1 (per indicator) |
Smoothing method | SMMA (Smoothed MA) | Simple average | Exponential weighting |
Time-forward shift | Yes (3, 5, 8 bars) | No | No |
Trend vs range identification | Built-in concept | No explicit signal | No explicit signal |
Developed by | Bill Williams | Conventional | Conventional |
The smoothed moving average (SMMA) used by the Alligator applies a form of exponential smoothing over a longer effective lookback period. Combined with the forward shift, this produces lines that are smoother and less prone to daily noise than standard EMAs or SMAs of comparable periods.
How to Add the Alligator to Your MetaTrader Chart
On both MT4 and MT5:
- Open your chart for the desired instrument and timeframe.
- Click Insert in the top menu → Indicators → Bill Williams → Alligator.
- The default settings (13/8, 8/5, 5/3) will be pre-filled. Adjust if desired.
- Click OK and the three coloured lines will appear on your chart.
Common Questions About the Alligator Indicator
What timeframe is best for the Alligator indicator? The Alligator can be applied to any timeframe. Most swing traders use it on H4 (4-hour) or daily charts, where the signals are less noisy. Scalpers and day traders often apply it to M15 or H1 charts, though false signals increase on shorter timeframes.
Is the Alligator indicator good for beginners? Yes — the visual logic is intuitive and the concept of “sleeping vs eating” is easy to understand. However, beginners should always combine it with a second confirmation tool and practise on a demo account first.
Can the Alligator indicator be used for stocks and indices? Yes. The Alligator is effective on any liquid, continuously traded asset — including stock CFDs, equity indices like the S&P 500 or DAX, commodities like gold and crude oil, and cryptocurrency CFDs where available.
What is the difference between the Alligator and the MACD? The MACD measures the difference between two EMAs and plots it as a histogram with a signal line, primarily used for momentum and divergence analysis. The Alligator is a trend identification tool using three offset SMAs to distinguish trending from ranging conditions. They serve complementary rather than competing purposes.
Conclusion
The Alligator indicator is one of the most conceptually elegant tools in technical analysis. Its core insight — that markets trend only a fraction of the time and that trading during a sleeping market is a losing proposition — remains as valid today as when Bill Williams first articulated it in the 1990s.
For traders who struggle to distinguish between genuine trends and sideways noise, the Alligator provides a structured, visual framework that cuts through that ambiguity. Used as a trend filter in combination with other entry signals, it is a genuinely valuable addition to any trading toolkit.
As with all indicators, the Alligator should be tested thoroughly on a demo account and understood at a conceptual level before being applied to live trading. No single indicator provides a complete trading system — but the Alligator comes closer than most to encoding a coherent, disciplined philosophy about when to trade and when to sit on your hands.
Risk Warning: Trading CFDs and forex carries a high level of risk. This article is for educational purposes only and does not constitute investment advice.
