Squeeze Momentum and Rate-of-Change Directional Strategy

Summary

This strategy pairs a squeeze-momentum measure with a smoothed rate-of-change filter. It identifies volatility compression by comparing Bollinger Bands with a Keltner Channel, and computes a momentum value using a linear-regression calculation. Positive momentum supports long exposure and negative momentum supports short exposure, provided the smoothed rate of change exceeds a configurable threshold in either direction. The script marks periods without sufficient rate-of-change movement as inactive in its display.

Entries follow changes in the active long or short state, and exits use percentage-based stop and profit levels. The script includes a selectable backtest date range, with defaults spanning 2012 through 2019, but the document provides no results or market-specific evaluation. The stated take-profit default is unusually large relative to the stop setting, and transaction costs are set to zero in the strategy configuration. Those assumptions can materially affect simulated outcomes, so the rules require testing with realistic costs and varied settings.

Key ideas

• Bollinger Bands inside a Keltner Channel indicate a volatility squeeze in the indicator framework.
• The strategy uses the sign of a regression-based momentum value to choose long or short direction.
• A smoothed rate-of-change threshold filters out weak movement.
• Percentage-based stop and take-profit orders manage positions.
• The script specifies a historical test window but provides no performance evidence, and its configuration assumes zero commission.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.