Many traders will enter the market following a candle close above/below all 3 lines at this point. The lips of the Alligator, the green line, is the fastest moving average and will be the first one a trader will want to monitor. You want to see the green line cross both of the slower moving averages. The portal informs that investing in financial markets may be associated with a significant level of risk and significant losses of invested funds.
The Alligator indicator is very effective in trading a price breakout from a tight range or a chart pattern. There are many trading strategies you can formulate with this trend indicator.
The best time to get on board a trend move is just before it happens. When the Alligator is sleeping, the market is range bound and a range trading strategy may be used which can give you a jump into the market early. It means that they are made of shapes that can be in turn divided into smaller copies of these shapes. To trade with profit, one has to recognize the behavioral fractal of lots of traders. Both the MFI and volume increasing is perhaps the most important combination, indicating a likelihood of trend continuation. Williams suggested to use the MFI indicator in combination with the Fractals indicator.
- On such green day you would already want to have an open trade in the direction of the market move.
- More often than not when a fractal appears like the one above, the price action is still “flat”.
- The green line crossing the other two moving averages and chasing the price is one of the indications that the Alligator is waking up and getting ready to feed.
- The BW MFI is intended to show the strength or weakness behind any price movement in the market.
- In this situation, a price crossover is a great way to get into the market in the direction of the trend.
- If a downward trend is observed, the position is taken when the price chart breaks the sales fracture.
Also, check out our guide on the best momentum trading strategies. As you can probably tell, the awesome oscillator saucer gauges short-term changes in the speed of the trend. Now, you might be familiar with the zero-line crossover signal since this is a common trade signal with many technical indicators.
How To Read Bw Mfi Indicator Colors
NinjaTrader Ecosystem, LLC is not responsible for the accuracy or content of any product, service or company linked to on this website. The Bill Williams Market Facilitation Index indicator is designed to measure the willingness of the market to move the price. It is basically an assessment of how market prices react to new volume in the market. By assessing price change and tick volume, the BW MFI can give a comprehensive assessment of market behaviour and prevailing sentiment. It essentially filters out potentially false price movement to ensure that traders only take trades in ideal market conditions. With moving averages on lower time frames, you can get a ton of whip back and forth. You should keep these instruments on your radar especially if price action is hinting at an increase in momentum.
I want to be buying 1 tick above the upper fractal or selling 1 tick below the lower fractal. A fractal is only confirmed if two bars have printed after the fractal, so I would need the strategy to execute after the print of the second bar. Never worked with creating a strategy in NT so I am flying blind here. A blue bar shows that the MFI is increasing, but the volume is decreasing, and this is called a fake. Price movement here is not backed up by volume and you should avoid following it. Bill Williams called this a ‘squat’, and it tells you to get ready, because the market might be about to leap into action.
How Do I Trade Bill Williams Fractals?
We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. We provide content for over 100,000+ active followers and over 2,500+ members. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. This will give you the best opportunity to salvage a trade if the price action would turn on you and turn into a bearish trend. It may “bounce” off these areas and head back in a bullish direction. The indicator uses a smoothed average calculated with a simple moving average to start. The AO identifies momentum by calculating the difference between the 34 period and 5 period simple moving averages.
When this fractal pattern develops it creates entry points for trades, with the top of the highest high being a buy signal when broken and the lowest low being a sell signal when broken. It is notable that this indicator is most accurate when used on higher timeframe charts , however there will also be far less signals generated. The Gator Oscillator appears at the bottom of the image, displaying green and red bars above, and featured below is a middle balance point in its dual histogram.
Bill Williams Fractals: How To Use Fractals In Trading?
Out of the 4 zero-line crossover signals, only 1 was a false signal. The simplest and most straightforward way to use Williams’ Awesome Oscillator is the crossover of the zero line. However, there are other unique signals like the Awesome Oscillator saucer signal or the Twin Picks or bullish bearish divergences. If the AO histogram is crossing above the zero line, that’s indicative of bullish momentum. Conversely, when it crosses below that’s indicative of bearish momentum. For an uptrend, the counter-trendline is placed across the highs of the pullback, so an upward breakout is a signal to go long.
When the 3 lines of the Alligator indicator are intertwined, the Alligator is sleeping. The longer the Alligator sleeps, the hungrier it may be when it awakes. Update it to the latest version or try another one for a safer, more comfortable and productive trading experience. Click the ‘Open account’button on our website and proceed to the Personal Area. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading.
Here you can see obvious pullbacks that have pulled to the green and red line while the blue kept the upwards slope. Once the lines have shown a direction, you can resort to using a price pattern that is a staple of all traders – pullbacks.
That’s why it’s so important to try trading techniques out first with ademo trading account. Of course, you can go even further and actually backtest your strategies. When the Alligator is feeding, watch for pullbacks against the main trend direction and trade those moves with a pullback strategy. Candlestick Cross and CloseNote the the green line has crossed over the red to the downside. Remember, these lines are displaced into the future and would have plotted in front of the candlestick we are shorting. Alligator PullbacksYou can determine the length of pullback needed by choosing where price has to pull back to.
The MFI Indicator appears below the main price chart and displays bars with four different colours. A green bar shows an increase in both MFI and volume, which is a trend continuation signal. A brown bar is what Bill Williams refers to as a ‘fade’, which is a decrease in both MFI and volume. The simplest trading strategy for the Alligator is to trade the close of a candlestick after it crosses the lines.
Learn About The Alligator Indicator
Kind and soft-hearted, creative and articulate, and a fantastic public speaker. It appears that Bill handed over the trading educational business to his daughter, sometime in the early 2000’s. I may be implementing this a little differently than you suggest, but the fractal support and resistance concept is very powerful. The new techniques are there for if you want to try something new. You could try a new technique in a demo account and see if it’s something you like then maybe add it to your trading plan. Step #4Exit the trade when two of the alligator lines cross over each other.
You might also like our discussion of the Best Forex Technical Indicators. Bill Williams is a highly educated man, whose indicators have widespread usage. But that doesn’t mean his indicators are necessarily going to work for you. Keep an open mind when it comes to adopting new trading techniques, but it also pays to keep a healthy amount of scepticism about you. Bill Williams’ studies in higher learning were a rather unusual combination, including a bachelor’s degree in Engineering Physics, and a doctoral degree in Psychology. It’s from this latter field that he likely gained his understanding and emphasis on the behavioural aspect of financial trading.
Our favorite day trading strategy Day Trading Price Action- Simple Price Action Strategy can teach you how to profitably day trade any market. Also, read about the Forex Mentors and the best investment you can make. Since Bill Williams is no longer an active trader, and has no track record of prior trading successes listed on the website, this is a bit of difficult review to write.