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Squeeze Momentum

The Squeeze Momentum Indicator (often called "TTM Squeeze" or just "Squeeze") is a technical analysis tool used by traders to identify periods when a security is likely to experience increased volatility and potential price breakouts. This version is a derivative of John Carter's "TTM Squeeze" volatility indicator, as discussed in his book "Mastering the Trade" (chapter 10).
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Manufacturer: nt8indicators
SKU: SQMOM
Vendor: nt8Indicators
$9.90

How It Works

The Squeeze Momentum Indicator is based on two key ideas:

  1. Volatility Compression ("Squeeze"): It detects when volatility is low and the price is "squeezed" between the Bollinger Bands and Keltner Channels.
  2. Momentum Direction: It shows whether bullish (upward) or bearish (downward) momentum is building up.

Components:

  • Bollinger Bands: These measure volatility above and below a moving average.
  • Keltner Channels: Another volatility-based envelope, but usually less sensitive than Bollinger Bands.

The Squeeze Signal:

  • Squeeze On: When the Bollinger Bands go inside the Keltner Channel, it signals low volatility ("squeeze on"). This is often shown as a red dot or bar.
  • Squeeze Off: When the Bollinger Bands move outside the Keltner Channel, it signals increasing volatility ("squeeze off"). This is shown as a green dot or bar.

Momentum Histogram:

  • The indicator usually includes a histogram that turns positive (bullish) or negative (bearish) based on momentum calculations (often using a variation of the Rate of Change or linear regression).

How Traders Use It

  • Squeeze On: Indicates a period of low volatility, often preceding a breakout (big move) in either direction.
  • Squeeze Off: The breakout is happening and traders look at the momentum histogram to judge the likely direction.
  • Momentum Bars: Green or positive bars suggest bullish momentum; red or negative bars suggest bearish momentum.
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Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.