Using Bollinger and Keltner Bands to Identify Volatility Squeezes

Summary

This document explains a Bollinger Bands squeeze indicator that compares Bollinger Bands with a Keltner Channel. A squeeze is present when the Bollinger Bands fit inside the Keltner Channel, which the description interprets as unusually low price dispersion relative to average true range and a potentially flat market ahead of a change in conditions. The indicator marks this state on the main price chart.

During a squeeze, the bands zone is shaded gray and the guidance is to avoid opening a new position. When the squeeze ends, the display indicates the closing price’s position relative to the Bollinger midpoint and shows price breaks beyond the bands. The document provides a qualitative explanation and usage rule, but no market, timeframe, parameter settings, backtest, or evidence that a squeeze reliably predicts a subsequent move. It therefore describes a signal for interpreting volatility compression, not a validated standalone trading strategy.

Key ideas

• A squeeze occurs when Bollinger Bands lie within the Keltner Channel.
• The indicator treats this condition as low volatility relative to average true range.
• The described usage avoids opening positions while the chart marks an active squeeze.
• After the squeeze, the display shows the close relative to the Bollinger midpoint and any band breaks.
• The document gives no test results or evidence that the signal predicts direction.

Tags

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