Indicators

Alligator and Fractals: How to Combine the Two Indicators in Practice

Astron Team · 09/24/2026 · 4 min read

The Alligator indicator, created by trader Bill Williams, uses three shifted moving averages to identify whether an asset is trending or "sleeping" in a sideways market. The name comes from the visual shape of the three lines: when they're bunched together, the alligator's mouth is closed, with no appetite; when they open up and spread apart, its mouth is open, indicating a trend forming. On its own, the Alligator already helps avoid entries in markets with no defined direction — but it becomes much more useful combined with a second indicator: fractals.

Fractals mark points on the chart where the price formed a local high or low, surrounded by lower-price candles (in the case of a high) or higher-price candles (in the case of a low) on both sides. Combining the two indicators answers two different questions: the Alligator says whether it's worth looking for an entry right now, and the fractal marks exactly where that entry could happen.

How the Alligator's three lines are calculated

The indicator uses three smoothed moving averages, each shifted forward on the chart:

• Jaw (blue line): 13-period average, shifted 8 candles forward.
• Teeth (red line): 8-period average, shifted 5 candles forward.
• Lips (green line): 5-period average, shifted 3 candles forward.

When the three lines are intertwined, the market is consolidating — historically, the phase where trend trades perform worst. When the green line crosses above the other two and they spread apart, the scenario favors long positions; when it crosses below, it favors short positions.

What the fractal shows on the chart

A top fractal appears when a candle's high is higher than the two candles before it and the two after it. A bottom fractal is the mirror of that, with a low lower than the four surrounding candles. Each confirmed fractal, meaning after the two following candles have closed, marks a level the price needs to break to validate the move's continuation.

Combining the two: an entry example

Suppose the Alligator has its mouth open, with the three lines spread apart and the green line above the others, indicating an uptrend on an asset priced at R$ 48.20. A top fractal forms at R$ 48.60. The long entry, in this combination, happens when the price breaks the fractal's level — meaning it clears R$ 48.60 — confirming that the trend signaled by the Alligator is indeed underway.

A common protective stop in this strategy sits below the most recent bottom fractal before the entry, say R$ 47.40. In this example, the trade's risk is R$ 1.20 per unit (R$ 48.60 minus R$ 47.40). If the exit target is double the risk, the profit goal sits at R$ 51.00 (R$ 48.60 plus R$ 2.40), resulting in a 1-to-2 risk-reward ratio — risking R$ 1.20 to seek R$ 2.40 of gain per unit traded.

Which charts this combination is usually used on

The Alligator-and-fractal pair shows up more often on longer timeframe charts — from 15 minutes to daily — because the natural lag of moving averages becomes proportionally smaller when each candle represents more market time. On 1-minute charts, the same lag can cost much of the move before the fractal even confirms. That doesn't prevent using it on shorter time frames, but it requires an additional filter, like checking whether the asset's volume at that hour supports the fractal breakout, and not just an isolated price spike.

Limitations worth knowing

The Alligator is a moving-average indicator, meaning it reacts to price with a lag — it confirms trends that have already started, it doesn't predict their beginning. In markets that alternate between sideways movement and false breakouts, the strategy can generate entry signals followed by a quick reversal. Because of that, most traders using this combination require the fractal to be aligned with the Alligator's direction, and avoid trading when the three lines are still close together, even if a fractal has formed.

Practicing before trading with real amounts

It's worth watching the Alligator's and fractals' behavior on historical charts before applying the strategy with real money, noting how often the fractal breakout actually followed the direction indicated by the indicator. Like any technical analysis tool, this combination organizes the chart reading, but doesn't eliminate the trade's risk or guarantee the pattern will repeat the same way in the future — validating with your own history is what separates a tested strategy from a bet based on appearance.