Study for Squeeze Momentum Indicator

The Study for Squeeze Momentum Indicator indicator provides an enhanced implementation of the classic squeeze momentum concept, designed to identify periods of consolidation and potential volatility breakouts with integrated entry and exit logic.

Usage

The indicator identifies a "squeeze" when Bollinger Bands trade within Keltner Channels, suggesting a period of low volatility often followed by a significant price move.

• Squeeze Detection: A "squeeze on" occurs when the market is consolidating. When the Bollinger Bands expand beyond the Keltner Channels, the "squeeze releases," signaling a potential breakout.
• Momentum Histogram: The underlying oscillator calculates the distance of price from a mean value using linear regression. Green bars indicate bullish momentum, while red bars indicate bearish momentum. Lighter shades represent increasing momentum, and darker shades represent waning momentum.
• Signals: The tool plots arrows on the chart to indicate potential long and short entries based on the release of a squeeze combined with momentum direction.
• Early Entries: By enabling the "Early entry on momentum change" setting, the indicator can signal entries as soon as momentum begins to shift during a squeeze, rather than waiting for the breakout release.

Details

This tool is based on the original Squeeze Momentum Indicator by LazyBear. It refines the concept by adding actionable signal logic and several filters to reduce noise. It utilizes Bollinger Bands (standard deviation based) and Keltner Channels (ATR based) to define volatility boundaries. The momentum component uses a linear regression of price relative to a smoothed average of the high/low range and a simple moving average.

Settings

Main Settings

• BB Length: The lookback period for the Bollinger Bands calculation.
• BB MultFactor: The standard deviation multiplier for the Bollinger Bands width.
• KC Length: The lookback period for the Keltner Channels.
• KC MultFactor: The multiplier applied to the range (ATR or High-Low) for the Keltner Channels.
• Use TrueRange (KC): When enabled, uses True Range for channel calculation; otherwise, uses High - Low.

Filters

• Early entry on momentum change: If enabled, signals are generated based on momentum shifts (extreme orders) rather than standard squeeze release rules.
• Filter for Momentum value: Enables a minimum threshold requirement for the momentum oscillator to trigger a signal.
• Min for momentum: The specific threshold value required for the momentum filter.

FAQ

How do I use the Study for Squeeze Momentum Indicator?

You can use it to identify upcoming market volatility. Look for the "squeeze" (consolidation) and wait for the release or a momentum shift to identify potential trend starts.

What do the different colors represent?

Green and red histogram bars show momentum direction and strength. Blue/Aqua/Neutral markers typically indicate the state of the squeeze (On vs. Off).

How can I access this tool?

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