Squeeze Range: Bollinger Bands / Keltner Channels

The Squeeze Range: Bollinger Bands / Keltner Channels indicator identifies periods of extreme price consolidation and potential breakout opportunities by overlaying Bollinger Bands onto Keltner Channels. It aims to visualize the "squeeze" dynamic where volatility contracts significantly, often preceding an explosive market move.

Usage

The Usage section focuses on the relationship between the two volatility bands. When the Bollinger Bands (plotted as circles) move inside the inner Keltner Channels (plotted as solid lines), the market has entered a "squeeze" state.

• Squeeze Entry: When the teal Bollinger Band dots are contained within the red Keltner Channel boundaries, it indicates low volatility and a consolidation phase.
• Squeeze Release: When the Bollinger Bands expand and exit the Keltner Channel range, the squeeze is considered "fired," suggesting the start of a new momentum-driven trend.
• Trend Identification: Users can observe the slope of the basis lines and the breakout direction of the bands to gauge the likely direction of the ensuing move.

Details

This tool is based on the TTM Squeeze methodology popularized by John Carter, which suggests that periods of low volatility are inevitably followed by periods of high volatility. Unlike standard squeeze indicators that often use a histogram, this script plots the actual price channels on the chart for direct visual confirmation.

It calculates the Bollinger Bands based on a standard deviation from a central moving average and the Keltner Channels based on a range-derived measurement (such as ATR or True Range). A squeeze is technically defined as the moment the Bollinger Band Width is less than the Keltner Channel Width.

Settings

Bollinger Bands

• Source: The price data used for calculations (default is Close).
• BB Length: The lookback period for the Bollinger Band calculations.
• BB MA Choice: Selects the type of Moving Average (1 for EMA, 2 for SMA, 3 for RMA).
• BB Standard Deviation: The multiplier for the standard deviation to set the band width.

Keltner Channels

• KC Length: The lookback period for the Keltner Channel calculations.
• KC MA Choice: Selects the type of Moving Average for the Keltner basis (1 for EMA, 2 for SMA, 3 for RMA).
• KC Bands Style: Determines how the channel range is calculated (Average True Range, True Range, or Simple Range).
• KC ATR Length: The lookback period specifically for the ATR calculation when selected.

FAQ

How do I interpret the Bollinger Band dots inside the Keltner lines?

This visual signal means a "squeeze" is active. It suggests that volatility is historically low and that a significant price breakout may be imminent.

Can I change the type of Moving Average used for the bands?

Yes, the settings allow you to choose between Exponential (EMA), Simple (SMA), and RMA (the moving average used in the RSI) for both sets of bands independently.

How can I access Squeeze Range: Bollinger Bands / Keltner Channels?

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