Squeeze Momentum Indicator v4_pine

The Squeeze Momentum Indicator v4_pine tool provides a visual representation of price consolidation and subsequent volatility breakouts by combining Bollinger Bands and Keltner Channels. It aims to identify "squeezes" in the market to help traders anticipate significant momentum shifts.

Usage

The tool is primarily used to identify periods of low volatility (the squeeze) and the likely direction of the following breakout.

• Identifying the Squeeze: When the Bollinger Bands trade inside the Keltner Channels, a "Squeeze" is on, represented by the center line crosses. This indicates the market is consolidating.
• The Release: When the Bollinger Bands expand outside the Keltner Channels, the "Squeeze" is released. This often precedes a significant move in price.
• Momentum Histogram: The histogram colors indicate the strength and direction of the momentum. Bright green and bright red represent strong bullish and bearish momentum, respectively, while darker shades indicate fading momentum.
• Zero Line Crosses: Traders often look for the histogram to cross the zero line as a signal of a trend change or momentum shift.

Details

The indicator is a Pine Script V6 implementation of the classic Squeeze Momentum concept. It functions by calculating the relationship between Bollinger Bands (standard deviation-based) and Keltner Channels (Average True Range-based).

The momentum component is derived from a linear regression of price relative to the average of the highest high and lowest low over a specific period. This calculation helps filter out market noise and provides a smoothed representation of directional pressure. By modernizing the code to version 6, it ensures compatibility with the latest TradingView features and improved execution stability.

Settings

• BB Length: Determines the lookback period for the Bollinger Bands calculation.
• BB MultFactor: Sets the standard deviation multiplier for the Bollinger Bands width.
• KC Length: Determines the lookback period for the Keltner Channels calculation.
• KC MultFactor: Sets the multiplier for the range used in the Keltner Channels.
• Use TrueRange (KC): A toggle to choose between using the True Range or a simple High-Low range for Keltner Channel calculations.

FAQ

How do I interpret the center line colors?

The center line indicates the state of the squeeze. When the Bollinger Bands are within the Keltner Channels, a squeeze is active. When they move outside, the squeeze is considered released, suggesting a potential increase in volatility.

What do the different histogram colors mean?

Bright colors indicate increasing momentum in that direction (green for up, red for down). Faded or darker colors indicate that the current momentum is slowing down or weakening compared to the previous bar.

How can I access this indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.