Squeeze Momentum Strategy Using Volatility Contraction and Expansion
Summary
This strategy combines Bollinger Bands and Keltner Channels to identify volatility contraction and subsequent expansion, then uses a linear-regression momentum value to guide directional trades. A squeeze is marked when the Bollinger Bands sit inside the Keltner Channels; a release occurs when they move outside. The documented rules seek entries as the squeeze releases, with momentum, recent momentum extremes, price direction, and a 100-period exponential moving average providing additional filters. Positions close when the momentum value turns against them.
The script sizes orders at a fixed fraction of strategy equity divided by the current close. The supplied material describes the indicator logic and settings but gives no backtest results or evidence of profitability. It also notes that the approach may benefit from extra entry filters and stop-loss or risk-based exits; position sizing alone does not bound losses. Market, timeframe, transaction costs, and parameter choices may materially change results.
Key ideas
- Bollinger Band and Keltner Channel containment is used to detect volatility contraction.
- A move from squeeze to release is combined with linear-regression momentum to time directional entries.
- Price direction and its position relative to a 100-period exponential moving average filter entries.
- Trades close when the momentum measure changes direction, while size is tied to equity and price.
- The document supplies no performance results, and it recommends additional risk controls.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.