TRADING INDICATORS OF BILL WILLIAMS

That’s basically a fancy way of saying that it shows price momentum and turning points. To see how it works, I added a 34-period and 5-period moving average to a chart of Tesla Inc. (TSLA) stock.

When the Awesome Oscillator moves from below zero to above zero, it means that the 5-period MA has crossed above the 34-period MA. When the Williams Awesome Oscillator drops below zero, however, it means the 5-period crossed below the 34 MA.

When the 5-period is accelerating away from the 34-period, the Oscillator values move away from zero, reflecting the difference in price between the two moving averages.

How to Trade with the Awesome Oscillator

The basic idea is that you want to trade in the trend direction:

• Focus on buying when the oscillator is above zero.
• Focus on selling when the oscillator is below zero.

Also note that the Awesome Oscillator changes color, giving us further information:

• Sell when the indicator is red (and below zero). Don’t sell when the bars are green, and exit any short when they turn green.
• Buy when the indicator is green (and above zero). Don’t buy when the bars are red, and exit long positions when they turn red.

There are potentially many ways you can use this indicator. These are just a couple of examples.

The Accelerator Oscillator is a leading indicator that helps traders avoid poor entries. The indicator is below zero if the Awesome Oscillator is below its 5-period moving average. If the indicator is above zero, then the Awesome Oscillator is above its 5-period moving average.

Whether the numbers are increasing or decreasing is based on the distance between the Awesome Oscillator and its moving average. In the chart below, I have added a moving average to the Awesome Oscillator so that you can see how the Accelerator Oscillator is moving with it.

How to Trade with the Accelerator Oscillator

This is another tool that you can use to fine-tune your entries and exits.

• Buy and hold long positions when there are green bars moving higher on the Accelerator Oscillator.
• Sell or hold short positions when there are red bars moving lower on the Accelerator Oscillator.

Keep in mind the trading guidelines for the Awesome Oscillator as well. The indicators should be used together.

The Alligator’s jaw line is a 13-period smoothed moving average projected 8 bars into the future. It is typically shown in blue.

The Alligator’s teeth line is an 8-period smoothed moving average projected 5 bars into the future and is shown in red.

The Alligator’s lips line is a 5-period smoothed moving average projected 3 bars into the future and is shown in green or black. The “alligator” tells you when to “feed” on the market.

“Only 15 to 30 percent of the time does the market trend.”– Bill Williams

How to Trade with the Williams Alligator Indicator

Here’s how the indicator works:

• Alligator sleeping: the moving averages are intertwined or moving sideways with each other. Avoid trading.
• Alligator waking: when the 5, 8, and 13-period MAs start spreading out that shows a trend could be emerging. Start looking for entries in the direction the 5 and 8 moving averages are going.
• Alligator eating: As the 5 is above the 8 is above the 13, and ideally all moving up, that signals an uptrend. When the 5 is below the 8 is below the 13, and moving down, that signals a downtrend. Trade in the direction of the moving averages.
• When the trend ends, the MAs cross and the alligator goes back to sleep. Avoid trading. The alligator may wake up right away or stay asleep. Wait till he wakes up and starts feeding again before trading in the direction of the moving averages.

You can combine the other indicators to tell you when to take trades in the direction of the alligator moving averages.

The Gator Oscillator has four phases, each indicated by the color of the bars on the histogram:

• Sleeping: Bars are red above and below the zero line. There’s no trend.
• Awaking: Differently colored bars on either side of the zero line. A trend is emerging.
• Feeding: Both sides of the zero line are colored green. There is a trend.
• Satisfied: One of the bars (above or below) turns red. This means the trend is losing momentum.

The indicator is showing the difference between the moving averages. Above the zero line is the difference between the blue and red lines; below the zero line is the difference between the red and green lines.

How to Trade with the Williams Gator Indicator

From the chart above, you can see the indicator says to stay out or be careful when the colors are mixed or red on the indicator. This effectively tells traders to stay out when the price is chopping sideways.

On three occasions, the bars turned green for more than two bars. The first time, the price dropped. The second time, the price moved sideways, which is a false signal because the price didn’t trend. On the third signal for a trend, the price had a significant drop and then Gator warned to exit when the price started moving up.

Fractals are based on 5 candles.

• An up arrow marks a high point with two candles with lower highs on either side.
• A down arrow marks a low point with two candles with higher lows on either side.

A Fractal acts as either resistance (buy fractal) or support (sell fractal). A break above a buy fractal triggers a buy signal, while a break below a sell fractal triggers a sell signal. The appearance of an arrow is NOT a signal to buy or sell on its own. It simply marks a recent high or low point in price.

How to Trade with Williams Fractals

Here is how to use Fractals for trading.

• Short when the price breaks below a sell fractal (the low of the candle on the down arrow).
  • Ideally, only sell when the signal occurs below the Alligator’s teeth (red line).
• Buy when the price breaks above a buy fractal (the high of the candle on an up arrow).
  • Ideally, only buy when the signal occurs above the Alligator’s teeth (red line).

The chart shows trade examples, with the black arrow marking when the trade is taken and the direction of the trade.

The indicator is color-coded with each color signifying a different market condition.

• Green: The MFI and volume are moving in the same direction. Trade in the direction of the price.
• Blue: The MFI is moving up and volume is moving down. Exit current positions and avoid taking new ones.
• Pink: The MFI is moving down but the volume is moving up. Get ready for a trend change.
• Brown: MFI and volume are both indicating that it’s not an ideal time to trade.

How to Trade with the Market Facilitation Index

Colors change frequently on the chart, so this indicator must be used with the other Williams indicators.

The MFI can be used to confirm or reject trade signals from the other Williams indicators. On the chart, a fractal sell signal occurred, but a trader could wait to enter a short trade until a green MFI bar occurs and the price is moving down. On the second trade, the two sell signals occurred together. Proceed with the short trade.

What are the best indicators for day trading?

There isn’t a “best” indicator. Each indicator does something different, so you need to find indicators that complement your trading style. Common indicators include the MACD, stochastic, parabolic SAR, and moving averages. You should check our review on the The Heiken Ashi Indicator.

What are the best indicators for forex trading?

Forex traders could use many different indicators to help their trading, or they could use none (trade based on price action alone). Consider using the Bill Williams Alligator or Fractals, as these are popular indicators.

What indicators are best for crypto trading?

Crypto trading is fast-paced with volatile trends. Focus on indicators that highlight the trend direction and keep you trading in that direction. Moving averages or the Williams Alligator are ones to consider.

How to use trading indicators?

Trading indicators, or technical indicators, help traders make trading decisions. They can tell a trader when to enter or exit a trade. Alternatively, the trader can enter or exit based on the direction the price is moving and indicators can be used to confirm or reject the trade signal. If it confirms, take the trade. If the indicator says not to take the trade, avoid it.

What is the RSI trading indicator?

The Relative Strength Index is a technical indicator that measures the speed and distance that price is moving. It can be used to confirm the direction price is moving, or it can forewarn of a reversal in price.

Final Word on Bill Williams Indicators

It is best to use the indicators you like and stick with those. Using all of them at the same time could result in too many conflicting signals.

The Awesome Oscillator, the Alligator, and Fractals are the most popular Bill Williams indicators, so using one or two of those is a good starting point. Their signals can be used in conjunction to identify times to enter trades, and times to avoid trading.

Do these indicators always work? No, nothing works all the time. They are simply tools. Practice using them in a demo account before risking real capital with them.