Squeeze Momentum Indicator Strategy

The Squeeze Momentum Indicator Strategy tool automates a trading system based on volatility expansion and linear regression momentum to identify explosive price movements.

Usage

The strategy generates signals based on the transition between low-volatility "squeezes" and high-volatility "releases."

• Long Entry: Occurs when a squeeze is released (gray cross appears after a black cross), momentum is positive and increasing, the price is above the 100-period EMA, and current momentum is at a local low relative to the last 100 bars.
• Short Entry: Occurs when a squeeze is released, momentum is negative and decreasing, the price is below the 100-period EMA, and current momentum is at a local high relative to the last 100 bars.
• Exits: Positions are closed when momentum begins to stall or reverse (e.g., a long position closes when momentum is lower than the previous bar).

The tool is best suited for trending markets and higher timeframes such as 1H, 4H, and Daily.

Details

This strategy is an automated implementation of the concept popularized by John Carter, using a combination of Bollinger Bands and Keltner Channels.

• Volatility Squeeze: When Bollinger Bands trade within Keltner Channels, it indicates a period of compression. The breakout of the bands outside the channels signals a release of that energy.
• Momentum Calculation: Instead of standard oscillators, this script uses a linear regression of price relative to the average of the high/low range and an SMA. This provides a smoother histogram for determining the direction of the trend during a volatility release.

Settings

• BB Length: The period used for Bollinger Bands calculations (default 20).
• BB MultFactor: The standard deviation multiplier for the Bollinger Bands width.
• KC Length: The period used for Keltner Channel calculations (default 20).
• KC MultFactor: The multiplier applied to the range to determine Keltner Channel width.
• Use TrueRange (KC): When enabled, uses Average True Range (ATR) for Keltner Channels; otherwise uses the high-low range.

FAQ

How do I interpret the histogram colors?

Bright green/red indicate increasing momentum in the respective direction, while darker/faded green/red indicate waning momentum.

What do the crosses on the zero line mean?

Black crosses indicate a market squeeze (low volatility). Gray crosses indicate the squeeze has been released (expanding volatility). Blue crosses indicate no specific squeeze condition is present.

How do I access Squeeze Momentum Indicator Strategy?

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