How to Use the Squeeze Momentum Indicator to Time Trades
The TTM Squeeze Indicator, popularized by John Carter, combines Bollinger Bands and Keltner Channels to detect when price action is entering a squeeze condition. This indicator is widely used in TradingView, NinjaTrader, and other charting platforms.
The mechanics:
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A squeeze is said to be in effect when Bollinger Bands move inside the Keltner Channels. This is marked by a red dot on the histogram.
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A squeeze release occurs when the Bollinger Bands expand outside the Keltner Channels. This is marked by a green dot.
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The momentum histogram represents momentum shifts—positive bars indicate bullish market momentum, while negative bars suggest bearish pressure.
Traders use this indicator to anticipate breakout trades. When a squeeze fires with increasing momentum periods, it can indicate the start of a strong directional move.
Here’s an example: A trader notices one or more red dots appearing on a daily chart of a stock that’s been consolidating. Over the next few days, the histogram turns green and increases in size. This signals a momentum shift, making it a potential buy or sell opportunity.
Unlike traditional volatility indicators like Bollinger Bands, the Squeeze Momentum Indicator considers both volatility and momentum, making it a popular indicator for spotting breakouts more precisely.
