Alligator Indicator
The Alligator Indicator, created by Bill Williams, consists of three smoothed moving averages — the Jaw (13-period, offset 8 bars), the Teeth (8-period, offset 5 bars), and the Lips (5-period, offset 3 bars) — used to identify the presence of a trend and the market's 'sleeping' versus 'waking' state.
Bill Williams named his three-line moving average system the Alligator because it metaphorically describes the market's behaviour: when the three lines are intertwined (the Alligator is sleeping), the market is in a non-trending consolidation phase and offers poor trading conditions. When the lines separate and fan out (the Alligator awakens and opens its mouth), a trending move is underway and the Alligator is eating — devouring the profit opportunity the trend offers.
The three lines are specifically constructed as Smoothed Moving Averages (SMMA), not simple or exponential MAs, applied to the median price ((High + Low) / 2) and then displaced (shifted) forward in time. The Jaw is the 13-period SMMA displaced 8 bars into the future; the Teeth is the 8-period SMMA displaced 5 bars; the Lips is the 5-period SMMA displaced 3 bars. The displacement is central to Williams's design: by shifting the averages forward, the system attempts to project where support or resistance would be if the current momentum continues.
The colour convention in most charting implementations uses blue for the Jaw, red for the Teeth, and green for the Lips. The relative arrangement of the three lines signals market phase. When Lips is above Teeth and Teeth is above Jaw (all lines rising and separated), the Alligator is in a bullish eating phase — historically associated with sustained uptrends in Williams's research. When Lips is below Teeth and Teeth is below Jaw (all falling and separated), the bearish eating phase applies. When the three lines converge and intertwine, the Alligator is sleeping and price is ranging.
The degree of separation between the three lines is used as a proxy for trend strength. A wide, expanding gap historically correlates with accelerating momentum. When the lines begin to converge back toward each other, momentum is potentially exhausting — the Alligator has eaten its fill and is returning to sleep.
Within the Williams trading ecosystem, Alligator signals are confirmed or denied by Fractals (breakout direction relative to the Alligator mouth), the Awesome Oscillator (momentum confirmation), and the Acceleration/Deceleration Oscillator (momentum acceleration). The system is designed to use all five indicators together rather than the Alligator in isolation.