TTM Squeeze

The TTM Squeeze indicator identifies periods of price consolidation and potential volatility breakouts by measuring the relationship between Bollinger Bands and Keltner Channels. This tool helps traders visualize when a market is "squeezing" into a tight range and provides a momentum oscillator to determine the likely direction of the eventual breakout.

Usage

The Usage of the TTM Squeeze focuses on the transition between low-volatility consolidation and high-volatility expansion. Traders typically look for the following visual cues:

• Squeeze Status (Center Dots): The dots on the zero line indicate whether a squeeze is active. Red dots signify "Squeeze On," meaning Bollinger Bands have tightened inside the Keltner Channels, indicating low volatility. Green dots signify "Squeeze Off," suggesting the bands have expanded outside the channels, which often triggers a volatility breakout.
• Momentum Histogram: The histogram bars oscillate around the zero line to show the direction and strength of momentum.
  • Bright Green: Positive momentum is increasing.
  • Dark Green: Positive momentum is decreasing.
  • Bright Red: Negative momentum is increasing.
  • Dark Red: Negative momentum is decreasing.

A common strategy involves waiting for the dots to turn from red to green (the "release" of the squeeze) and entering a trade in the direction indicated by the histogram's color.

Details

The TTM Squeeze is based on the original concept by John Carter. It functions by calculating two primary volatility envelopes: Bollinger Bands (usually set to 2 standard deviations) and Keltner Channels (usually set to 1.5 or 1 ATR). When the Bollinger Bands trade within the Keltner Channels, it mathematically signals that price action is unusually quiet.

The momentum component is derived from a linear regression of the price's position relative to the average of the high/low range and a Simple Moving Average (SMA). This provides a smoothed representation of trend strength, allowing traders to filter out minor price fluctuations during a breakout.

Settings

• Length: The lookback period used for the Bollinger Bands, Keltner Channels, and the momentum oscillator. Increasing this value will result in a slower, more lagging indicator, while decreasing it makes the tool more sensitive to short-term price movements.

FAQ

What does it mean when the dots are red? Red dots on the zero line indicate a "Squeeze On" state, where volatility is low and the market is consolidating. This is often viewed as a "coiling" phase before a significant price move.

How do I interpret the histogram colors? The histogram indicates momentum. Increasing momentum is shown in brighter colors (Bright Green/Bright Red), while fading momentum is shown in darker shades (Dark Green/Dark Red).

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