Using the Squeeze Momentum Indicator to Trade Volatility Releases

Summary

This note explains a version of the TTM Squeeze indicator, which compares Bollinger Bands with a Keltner Channel to identify periods of compressed volatility. When the Bollinger Bands fit inside the Keltner Channel, the indicator marks a squeeze; a later release marks the transition out of compression. A momentum histogram supplies a directional cue: the described approach enters in the direction of momentum after release and exits when the histogram’s color changes. The implementation uses a linear-regression-based momentum calculation rather than the simpler momentum measure attributed to the original method.

The author offers personal, explicitly limited experience as support and suggests that an additional measure such as ADX or WaveTrend may help identify entries. No systematic test, performance data, market selection, or risk sizing rules are provided. A volatility release can move either way, and the indicator’s direction cue does not establish that a breakout will persist. The note is best treated as an indicator concept and discretionary trade framework requiring independent validation.

Key ideas

• The indicator identifies volatility compression by comparing Bollinger Bands with a Keltner Channel.
• A squeeze release marks a possible transition from low volatility to expansion.
• The described entry uses the momentum histogram to choose a direction after release.
• The proposed exit occurs when the histogram changes color, indicating a momentum shift.
• The author notes the method is based on limited experience and suggests combining it with another indicator.

Tags

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