One of the reasons why crypto differs so much from other financial markets is the volatility. In our previous blog posts, we explained swing trading and scalping strategies – the most popular approaches in the cryptocurrency world. However, to a great extent, any trading strategy depends on a trader’s ability to catch the trend and act accordingly. That is why today we will talk about the Bill Williams alligator indicator – the technical indicator to define the trend direction.
The Williams Alligator technical indicator takes its name from a famous forex trader Bill Williams. This tool is used to identify trends in the market. Cryptocurrencies are infamous for their volatility but, often market goes sideways or crypto winter happens, which means low volatility. This leaves traders with almost no opportunities to make money, especially if we’re talking about short-term trading.
In such conditions, it’s very difficult to figure out what the trend is and recognize a sell or buy signal. The Williams Alligator is one of the simplest technical indicators that help traders read the market and interpret or foresee the coming trends and true/false signals.
Let’s have a closer look at the Alligator indicator and how it works. This tool consists of the three moving averages over certain price periods, all of them marked by another color:
Here’s how the Williams alligator indicator looks over the 1 year price period for BTC/USDT trading pair. As you can see, on the left side, there’s some space between all the lines, while closer to the right side, the lines are almost intertwined together. Below, we’re explaining what it means.
When the three balance lines are close to each other and head in the same direction, it means the trend is very weak and the coin’s price will unlikely change dramatically in the near future.
The picture below shows the Alligator indicator on the timeframe of the last month – approximately from the 22nd of September until the 21st of October. One can clearly see that all three: red, green, and blue lines are on the same level, which means that Bitcoin’s price is moving neither up nor down.
On the contrary, when the three indicator lines are located further from each other, it means that the moving averages are growing and the next trend is coming. The three lines are expanding and thus, remind the alligator’s open jaw.
In case of an uptrend, the green line will upward cross the other lines. In the downward trend, the blue line will be at the top.
For example, in the picture below, we can see one pretty strong bearish trend that lasted from the beginning of May till the beginning of June. The next bearish trend is visible in the time frame from the middle of June till the beginning of July.
The Williams alligator indicator is one of the simplest technical tools that will be especially useful for crypto newbies. For more advanced trading, more complicated technical indicators will be needed.
Undoubtedly, building a trading strategy based on only how the alligator indicator works would be a poor decision. It’s always recommended to set up stop-loss orders and exit points to minimize losses in case something goes wrong.
The Williams Alligator indicator is available on numerous trading platforms so that you can choose the one that’s the most beneficial.
If you’re looking for a secure and reliable one, then the CoinCasso exchange platform is at your service. We’re a financial platform that specializes in crypto trading. Create an account with us, make a top-up, and start trading in no time.
This technical analysis tool was created to determine trading signals. Bill Williams created the Alligator indicator to analyze the forex markets for trends, but it can be used in other financial markets as well. This tool consists of the three smoothed moving averages - the three lines that show whether a price is moving up or down.
The Alligator indicator is built from the three moving averages over a specific time: blue line, green line, and red line. The green line represents the Williams alligator's lips, the blue line - the alligator's jaw, and the red line - the alligator's teeth accordingly. If those alligator lines are close to each other it means that the market goes sideways, and not much is going on. Conversely, if the moving averages are further from each other, then it means that the alligator wakes up and traders can expect a bullish trend (when the green line is the top one), or a downward trend (when the blue line is the top one).
Identifying market trends and a trade signal is key to successful trading, not only in forex trading but also in cryptocurrencies and stocks. The crypto market is incredibly volatile and trend prediction and recognition are the skills needed to gain a profit from cryptocurrency trading. Three lines of the Williams Alligator indicator representing the jaw, teeth, and lips show if the market is going up or down. Thus, one can decide when exactly to go for long or short positions.
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