TTM Squeeze

The Squeeze indicator measures the relationship between two studies: Bollinger Bands® and Keltner’s Channels. When the volatility increases, so does the distance between the bands, conversely, when the volatility declines, the distance also decreases.

The Squeeze indicator finds sections of the Bollinger Bands® study which fall inside the Keltner’s Channels. When the market finishes a move, the indicator turns off, which corresponds to bands having pushed well outside the range of Keltner’s Channels.

To produce Buy/Sell signals, the Squeeze indicator is plotted along with Momentum Oscillator. The Momentum Oscillator histogram is smoothed up with linear regression and other techniques. When the indicator is on (green) and the Momentum Oscillator is colored cyan, it is considered a Buy signal (this signal is supposed to be correct until two blue bars in a row). When the indicator is on and the Momentum Oscillator is red, it is considered a Sell signal (this signal is supposed to be correct until two yellow bars in a row). When the indicator is off (red), no trade is recommended.

If you are trying to capture the entire move in a run you could go long as soon as the second yellow bar shows up on the histogram. This is somewhat risky for short term trades because as you can see from the above image the histogram can change for a few bars and then reverse for a few bars before continuing a trend.

An underlying in said to be “squeezing” when the dots on the momentum oscillator (middle line) are red.

An underlying is said to have “fired” when the dots turn green. You can anticipate a move to last around 6 to 10 bars once the oscillator goes from red to green. For example if you are on a daily time frame the move should last around 6 days. On the hourly chart, the move should last around 6 hours.