Gator Oscillator: Turning the Alligator’s Mouth Into a Histogram

The Alligator tells you whether a trend might be starting. What it doesn’t do well is tell you, at a glance, how wide its mouth is getting or how quickly it’s closing. Three wavy lines sitting on top of price can be hard to read, especially on a busy daily chart of a mid-cap that keeps faking out. The gator oscillator fixes that. It takes the gaps between those three lines and plots them as two histograms, one above zero and one below, so you can see the mouth opening and closing as bars instead of guessing from the lines.

We covered the parent indicator in our Williams Alligator guide. This piece picks up from there: how the gator oscillator is built, what the green and red bars actually mean (it isn’t buy and sell), a full worked example with made-up numbers, and where the tool tends to let traders down.

Where the gator oscillator comes from

The oscillator belongs to the family of tools built by the American trader Bill Williams. FXCM’s Marketscope help page on the Gator lists it as one of five Williams indicators in its standard set, alongside the Alligator, Fractals, the Accelerator Oscillator and the Awesome Oscillator, and says it was developed in 1995 and presented in his book New Trading Dimensions.

The thinking behind it is the same as the Alligator’s. Williams believed markets spend most of their time going nowhere. The MetaTrader 5 help page on the Alligator puts the share of time with clear trends at only 15 to 30 per cent, and argues that traders should follow those trends and stay away from markets stuck in a range. The gator oscillator is a way of measuring which of those two states the market is in right now.

The colours on a gator oscillator say nothing about direction. A row of green bars in a falling stock is the gator eating on the way down.

The three lines it is built from

You can’t read the gator without knowing what feeds it. Everything starts with the median price of each bar, which is simply the high plus the low, divided by two. MetaTrader’s documentation then builds three smoothed moving averages (SMMA) of that median price, each pushed forward in time:

• Jaw (blue line): a 13-period SMMA shifted 8 bars into the future.
• Teeth (red line): an 8-period SMMA shifted 5 bars into the future.
• Lips (green line): a 5-period SMMA shifted 3 bars into the future.

The shortest line, the lips, reacts fastest. The jaw is the slowest. When all three are tangled together, nothing much is happening. When they fan out, a trend is under way. The order of the fan follows from plain moving-average arithmetic: when prices have been rising, the fast lips sit above the slower teeth and jaw, and when prices have been falling, the fast line drops below the slower ones.

How the gator oscillator is calculated

Here’s the whole calculation. According to the MetaTrader 5 help page on the Gator Oscillator, the indicator shows how far the Alligator’s balance lines are converging or diverging:

• The upper histogram is the absolute difference between the jaw (blue) and the teeth (red).
• The lower histogram is the absolute difference between the teeth (red) and the lips (green), drawn with a minus sign so it hangs below zero.

So both halves are just distances. Upper bar = |Jaw − Teeth|. Lower bar = −|Teeth − Lips|. The taller the bars on either side, the wider that part of the Alligator’s mouth is open. Because both are absolute values, the histogram looks the same shape whether the stock is rising or falling. That’s the first thing people get wrong.

What the green and red bars mean

Each bar gets a colour based on how it compares with the bar before it on the same side. FXCM’s help page explains that when a value is greater than the previous one it is coloured green, and when it is smaller it is coloured red. In plain terms, a green bar means that part of the mouth is wider than it was one bar ago. A red bar means it has narrowed.

That’s it. Green isn’t bullish and red isn’t bearish. DailyForex’s guide to the gator oscillator makes the same point: the colours show the relative strength of the move, not its direction. If you forget this and buy every time you see green, you will eventually buy right into the middle of a strong selloff.

The four phases of the gator

Williams leaned hard on the animal metaphor, and the phases are easier to remember if you go along with it. DailyForex lays them out like this, reading the two bars for each session together:

1. Sleeping: both bars are red. The lines are drawing closer, there’s no trend, and the gator is resting.
2. Awakening: one bar turns green while the other is still red. It doesn’t matter which side is which. Something is starting to stir.
3. Eating: both bars are green. The mouth is opening on both sides, which is what a trend that’s gathering strength looks like.
4. Sated: after a stretch of eating, one bar turns red. The trend may be running out of steam.

FXCM describes the same cycle in slightly different words. Bars hugging the centre line and flipping colour mean the gator is asleep and the market is moving sideways. Bars spreading away from the centre mean a trend is beginning. All-green bars mean the gator is eating, and the further the bars stretch from the centre, the stronger the trend. When everything turns red, the gator has had its fill and goes back to sleep.

A worked example with hypothetical numbers

Let’s run the maths on seven sessions of a made-up stock. These are not real prices from any company; they’re invented so the arithmetic is easy to follow. The three columns on the left are the Alligator’s line values for each session (already calculated and shifted), in rupees. The next two columns are the gator bars, worked out with the formulas above, with the colour in brackets.

Walk through it row by row and the phases fall out on their own.

Session 1 is just the starting point. Jaw minus teeth is 1,000.0 − 999.2 = 0.8, so the upper bar is +0.8. Teeth minus lips is 999.2 − 998.8 = 0.4, so the lower bar is −0.4. There’s no earlier bar to compare with, so no colour yet.

Session 2 shows both gaps shrinking. The upper bar drops to 0.5 and the lower bar to 0.2, so both turn red. The lines are bunching up. The gator is asleep, and if you’d looked at the price chart you’d probably have seen a dull, sideways day or two.

Session 3 is where it gets interesting. The lips jump to 1,001.0, well above the teeth at 999.7. The lower gap balloons to 1.3, so the lower bar turns green. The upper gap is still shrinking (0.1), so the upper bar stays red. One green, one red: the gator is waking up. Notice the lips are now on top, which hints that if a trend comes, it may be upward. The gator itself can’t tell you that, though. You learn the direction from the order of the Alligator lines or from price.

Sessions 4 and 5 are textbook eating. The teeth pull away from the jaw and the lips pull away from the teeth, so both bars grow: +0.7 and −2.8, then +1.6 and −3.7. Two green bars on both days. The mouth is opening on both sides and the lines are stacked lips, teeth, jaw from top to bottom, with the fastest average on top, the way moving averages line up when prices are climbing.

Session 6 brings the first warning. The upper bar keeps growing to 2.4, still green, but the lower gap slips from 3.7 to 3.6. Only a small dip, but it’s enough to turn the lower bar red. After an eating stretch, one red bar marks the sated phase. The fastest line, the lips, is no longer racing away from the teeth. Momentum on the short end is fading even though the slow end is still widening.

Session 7 confirms it. The lower bar drops to 2.7 and stays red. If both bars had turned red here, we’d be back to sleeping, and FXCM’s description would call the trend over.

The gator usually turns red on the lower side first. The lips are the fastest line, so they’re the first to stop running.

How traders tend to use it

The textbook approach from DailyForex is simple enough to write on a sticky note: look to enter in the awakening phase, hold through the eating phase, and think about exiting when the sated phase arrives. In practice, most traders who use the gator don’t treat it as a standalone signal. A few common ways to use it on Indian stocks and indices:

• As a filter. If both bars are red and stubby, the market is ranging. That’s a cue to skip trend-following setups like moving average crossovers or breakouts, which tend to whipsaw in that kind of tape.
• With the Alligator for direction. Check the order of the three lines. Fast lips above the slower teeth and jaw points to rising prices, and the reverse to falling prices. FXCM’s help page itself recommends pairing the gator with trend indicators, since it shows whether a trend is present but not which way it runs. The gator then tells you whether that trend is gaining or losing force.
• With fractals for entries. Some traders wait for the gator to wake up and then use a break of the most recent fractal high or low as the actual trigger. Our Williams fractal indicator explainer covers how those swing points are marked.
• As a trailing-stop cue. When you’re already in a winning trade, a sated reading isn’t a reason to dump the whole position, but it’s a fair moment to tighten your stop.

Where the gator oscillator falls short

We like the gator as a quick read on trend strength, but it has real blind spots, and you should know them before you lean on it.

It lags, by design. It’s built from smoothed moving averages of 5, 8 and 13 bars. By the time the bars are tall and green, a good part of the move has usually happened already. The forward shift in the Alligator lines doesn’t make it predictive either; it’s a display choice, not a forecast.

Colours flicker in choppy markets. One bar a whisker taller than the last turns green. One a whisker shorter turns red. In our example, a fall from 3.7 to 3.6 was enough to flip a colour. On low-volume stocks or noisy intraday charts, you can get awakening and sated signals back to back with nothing meaningful happening in between.

It is blind to direction. We’ve said this already, but it’s the most common mistake. Two green bars during a collapse are just as green as during a rally.

Gap-heavy charts distort it. Indian stocks often gap at the open on results, block deals or global cues. Because the median price only uses each bar’s high and low, a big gap can push the lines apart quickly and make the gator look like it’s eating when it’s really just reacting to one jump.

Settings matter. The standard 13/8/5 with 8/5/3 shifts is what MetaTrader uses. Some platforms let you change these, and two traders with different settings will see different phases on the same chart. If you test changes, test them properly on past data rather than tweaking until a single chart looks perfect.

A simple checklist before you act on it

• What’s the order of the Alligator lines? That’s your direction.
• Which phase is the gator in: sleeping, awakening, eating or sated?
• Does price agree? Higher highs and higher lows for an uptrend, the reverse for a downtrend.
• Is there an event coming, like quarterly results, that could gap the stock and wreck the reading?
• Where does your stop go, and how much are you risking if you’re wrong?

If you’re new to indicators in general, our technical analysis guide for Indian stocks is a better starting point than any single oscillator.

Quick recap

The gator oscillator turns the Alligator’s three lines into two histograms. The upper bar is the distance between the jaw and the teeth, and the lower bar is the distance between the teeth and the lips, drawn below zero. A bar is green when it’s taller than the previous one and red when it’s shorter. Two reds mean the market is asleep, one green means it’s waking up, two greens mean it’s eating, and a red after a run of greens means it’s getting full. It measures trend strength, never direction, and it lags. Pair it with the Alligator or price action, and treat its signals as context rather than commands.

Disclaimer: This article is for educational purposes only and is not investment advice. The worked example uses hypothetical numbers, not real stock prices. Trading and investing involve risk; please do your own research or consult a SEBI-registered adviser before making any investment decision.