Bill Williams Alligator
Trend-following indicator using three delayed smoothed moving averages.
Usage
Use to identify trend presence and direction. When the three Alligator lines are separated and fanning, the market is trending; when they converge or intertwine, the market is ranging.
Background
Bill Williams introduced the Alligator in Trading Chaos (1995) as three offset SMAs with periods 13, 8, and 5 and offsets of 8, 5, and 3 bars. The three lines represent the Jaw, Teeth, and Lips of the Alligator. When the Alligator is sleeping (lines intertwined) no trade is taken; when it wakes and opens its mouth a trend trade is entered. — StockCharts ChartSchool
Formula
[ \text{Jaw} = \text{SMMA}(13, 8), \text{Teeth} = \text{SMMA}(8, 5), \text{Lips} = \text{SMMA}(5, 3) ]