Bollinger Bands Squeeze

The Bollinger Bands Squeeze indicator is a volatility-based tool designed to highlight periods of market consolidation (squeezes) and potential breakout momentum by monitoring the relationship between Bollinger Bands and their historical bandwidth.

Usage

The Bollinger Bands Squeeze is primarily used to identify "quiet" market phases where a significant price expansion is likely to follow. When the Bollinger Bands contract significantly, a colored cloud appears between the bands, signaling a squeeze. Traders often look for the following:

• Squeeze Detection: A colored cloud appears when the current bandwidth reaches a multi-period low, suggesting a potential breakout is imminent.
• Volume Pulses: The indicator plots triangles above or below the price action when significant volume surges occur. A bullish triangle (green) appears when the price closes higher on high volume, while a bearish triangle (red) appears when the price closes lower on high volume.
• Band Bulge: If enabled, the indicator can also highlight "bulges," which occur when volatility expands rapidly beyond historical norms.

Details

The script calculates volatility using standard Bollinger Bands (defaulting to a 26-period length). A "squeeze" is traditionally defined when the BandWidth reaches its lowest point over a lookback period (default 50). This implementation includes a "Complicated Squeeze" logic, which incorporates the standard deviation of price relative to its own Bollinger Bands to provide a more nuanced view of market contraction. The volume pulse logic uses an Exponential Moving Average (EMA) of volume multiplied by a user-defined threshold to filter for truly significant activity.

Settings

Interface

• Bullish Color: Sets the color for bullish volume pulse triangles.
• Bearish Color: Sets the color for bearish volume pulse triangles.
• Squeeze Color: Sets the color for the cloud during a squeeze event.
• Shape Offset: Adjusts the vertical distance of the volume pulse shapes from the price bars.

FAQ

How do I use the Bollinger Bands Squeeze?

You can use it to identify periods of low volatility. When the squeeze cloud disappears, it often indicates the start of a new trend or a volatility breakout.

What is the "Complicated Squeeze" setting?

The "Complicated Squeeze" adds an extra layer of calculation involving the standard deviation of price volatility to filter squeeze signals more effectively than standard bandwidth alone.

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.