Reprinted from: http://www.alpari-forex.com/en/chaos/alligator.html

Bill Williams' Alligator
	The Alligator is the combination of three balance lines (pic.1): Alligator's Jaw (the blue line) — 13-period moving average at the mid price (High+Low)/2, which is offset 8 bars into the future; Alligator's Teeth (the red line) — 8-period moving average at the mid price (High+Low)/2, which is offset 5 bars into the future; Alligator's Lips (the green line) — 5-period moving average at the mid price (High+Low)/2, which is offset 2 bars into the future. In order to build the Alligator in MetaTrader 4 use the “Insert -> Indicators -> Bill Williams – Alligator” menu sequence. Picture 1. Bill Williams' Alligator The current trend direction or its absence may be determined with the help of Alligator. If all three lines are intertwined, the Alligator is asleep and the market is range-bound. The longer it sleeps, the hungrier it gets. When it wakes up from a long sleep it chases the price much farther, therefore price movements are much stronger. When the Alligator is asleep, stay square. Once the Alligator wakes up, it opens its mouth (Balance lines diverge) and starts hunting. Having eaten enough, it goes to sleep again (Balance Lines converge), so it's time to fix profits. If the Alligator is not asleep, the market is either uptrending or downtrending: if the price is above the Alligator's mouth then it's an uptrend; if the price is below the Alligator's mouth then it's a downtrend. The Alligator also helps to determine the character of the Elliot waves. If the price is outside the Alligator's mouth the wave is impulsive; if the price is inside the Alligator's mouth the wave is corrective. The formula for the Alligator: MEDIAN PRICE = (HIGH + LOW) / 2 ALLIGATORS JAW = SMMA (MEDEAN PRICE, 13, 8) ALLIGATORS TEETH = SMMA (MEDEAN PRICE, 8, 5) ALLIGATORS LIPS = SMMA (MEDEAN PRICE, 5, 3) Where: MEDIAN PRICE — the central price; HIGH — the highest bar price; LOW — the lowest bar price; SMMA (A, B, C) — smoothed moving average (A - smoothed data, B - smoothing period, C - move into the future). ALLIGATORS JAW — blue line; ALLIGATORS TEETH — red line; ALLIGATORS LIPS — green line.