Squeeze Momentum: Volatility Compression and Momentum-Based Entries

Summary

The Squeeze Momentum Indicator adapts the TTM Squeeze concept by comparing Bollinger Bands with Keltner Channels. When the Bollinger Bands fit inside the Keltner envelope, the indicator marks a volatility squeeze; when they move outside it, the squeeze is released. A momentum histogram is calculated with a linear regression based on price relative to a range and moving-average reference. The accompanying commentary suggests entering after release in the direction of the momentum reading and exiting when momentum changes.

The document notes that the plotted momentum method differs from the simpler version attributed to John Carter and says an additional indicator, such as ADX or WaveTrend, may help identify entries. It provides settings and a BTC/USD Bitfinex backtest configuration for about a year, but no performance statistics. The included strategy code enters on histogram changes around zero, which does not exactly match the prose recommendation to wait for a squeeze release. This discrepancy, along with the lack of reported results, limits conclusions about effectiveness.

Key ideas

• A squeeze is identified when Bollinger Bands sit within Keltner Channels.
• A release occurs when the Bollinger Bands expand beyond the Keltner envelope.
• The histogram uses a linear-regression momentum calculation to indicate direction and change.
• The prose recommends trading in the momentum direction after release and exiting on a momentum change.
• The sample code uses separate zero and histogram-change conditions, and reports no performance results.

Tags

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