What it is
Squeeze Momentum is a volatility tool in its own pane. It answers two questions: is the market unusually quiet right now, and which way is momentum leaning? Quiet periods tend to be followed by bigger moves, so the squeeze flags the moment to pay attention.
It is often called the TTM Squeeze (after John Carter) or the LazyBear squeeze, which is the popular free version. A row of dots marks when the squeeze is on and off, and a histogram above or below zero shows the momentum.
How it is calculated
1. Take a 20 period simple moving average of the close. 2. Build Bollinger Bands 2 standard deviations above and below it. 3. Build a Keltner Channel 1.5 times the 20 period ATR (average true range, the average candle size including gaps) above and below the same average. 4. If both Bollinger Bands are inside the Keltner Channel, the squeeze is on. When they move back outside, it has released. 5. For momentum, find the middle of the highest high and lowest low of the last 20 candles, average that with the 20 period average, and subtract it from the close. 6. Smooth that difference with a 20 period linear regression. Bars above zero lean up, below zero lean down; brighter bars mean momentum is growing.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| length | 20 | 2 to 200 | How many candles the bands, ATR and momentum use. Shorter reacts faster and squeezes more often. |
| BB width | 2 | 0.5 to 5 | How many standard deviations the Bollinger Bands sit from the average. Lower makes squeezes rarer. |
| KC width | 1.5 | 0.5 to 5 | How many ATRs the Keltner Channel sits from the average. Higher makes squeezes more frequent. |
How to read it
How to trade it
- 1
Wait for the squeeze to be on for several candles, then mark the high and low of that quiet stretch.
- 2
Entry trigger: the squeeze releases and the momentum bars are above zero and growing (long) or below zero and growing (short). On gold 15 minute that might be a close above the squeeze range.
- 3
Stop: just beyond the other side of the squeeze range. If gold coiled in a 12 point box, the stop sits a couple of points outside it.
- 4
Target: 2 times the stop distance, or trail the stop once momentum bars start to shrink. On US30 5 minute with a 40 point stop, a first target is 80 points.
- 5
Skip the trade if momentum and the breakout disagree, for example price breaks up while bars are below zero.
The idea is cancelled if price closes back inside the squeeze range, or the momentum bars cross zero against your trade soon after the release.
WickSpeak draws it on the chart and writes a plain-English reading on the live candle: what it is, what it is doing now, how to trade it and what would prove it wrong. Playbook can test it as a condition in a play: squeeze releases, squeeze is on, crosses above zero, crosses below zero, is above zero, is below zero, is rising and is falling.
Best markets and timeframes
Works on any market that has quiet and busy phases, which suits gold and US30 well around session opens. The 15 minute to 1 hour charts give cleaner squeezes than 1 minute.
Common mistakes
- Entering while the squeeze is still on, before any release, and getting chopped about.
- Trading the release against the momentum bars because the candle looked strong.
- Expecting every squeeze to produce a big move; some release into nothing.
Works well with
Questions traders ask
What are the best Squeeze Momentum settings?
The standard settings are length 20, Bollinger Bands 2 and Keltner 1.5, and most traders keep them. Shortening the length to 10 or 14 gives more frequent squeezes on fast charts, at the cost of more false releases.
What do the dots mean on the squeeze indicator?
The dots show whether the squeeze is on or off. A squeeze is on when the Bollinger Bands sit inside the Keltner Channel, meaning volatility is unusually low. When the dots change back, the squeeze has released.
Is the TTM Squeeze the same as Squeeze Momentum?
They use the same idea: Bollinger Bands inside a Keltner Channel plus a momentum histogram. The LazyBear Squeeze Momentum is a widely used free version of John Carter's TTM Squeeze, and the momentum line is worked out slightly differently between versions.
Does the squeeze tell you which way price will break?
Not on its own. The squeeze says a move is likely to get bigger; the momentum bars show which way pressure leans. Wait for the release and a close outside the quiet range before choosing a side.