Video Demonstration of Squeeze Momentum PRO
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OVERVIEW – Squeeze Momentum PRO for Ninjatrader 8
Squeeze Momentum PRO is based on TTM Squeeze that is a volatility and momentum indicator introduced by John Carter of Trade the Markets (now Simpler Trading), which capitalizes on the tendency for price to break out strongly after consolidating in a tight trading range.
The volatility component of the Squeeze Momentum PRO measures price compression using Bollinger Bands and Keltner Channels.
If the Bollinger Bands are completely enclosed within the Keltner Channels, that indicates a period of very low volatility.
This state is known as the squeeze. When the Bollinger Bands expand and move back outside of the Keltner Channel, the squeeze is said to have “fired”: volatility increases and prices are likely to break out of that tight trading range in one direction or the other. The on/off state of the squeeze is shown with small dots on the zero line of the indicator: red dots indicate the squeeze is on, and green dots indicate the squeeze is off.
The Squeeze Momentum PRO also uses a momentum oscillator to show the expected direction of the move when the squeeze fires. This histogram oscillates around the zero line; increasing momentum above the zero line indicates an opportunity to purchase long, while momentum falling below the zero line can indicate a shorting opportunity.
How to use Squeeze Momentum PRO
The Squeeze Momentum PRO has both volatility and momentum components. The Squeeze dots signal when volatility conditions are right to buy; the momentum histogram indicates the direction (long or short) in which to trade.
While volatility levels are low, the squeeze dots will be red. When volatility increases and the Bollinger Bands expand until they are outside of the Keltner Channels, the squeeze has “fired” and the squeeze dots will be green. Carter recommends buying on the first green dot after one or more red dots.
The momentum histogram helps to determine the direction in which to trade. If the momentum is above the zero line and rising (light blue bars), buy long; if the histogram is below the zero line and falling lower (dark red bars), that indicates a shorting opportunity.
The histogram bars are color coded for ease of interpretation. Bars above the zero line are blue and below the zero line are red. In addition, a bar that is lower than the previous bar will be a darker color (dark blue or dark red), and a bar that is higher than the previous bar will be a lighter color (light blue or light red).
Price moves after a squeeze fires tend to last for 8-10 bars. When the histogram changes direction and starts moving back towards the zero line, that is a signal to sell.
The momentum histogram can also be used to determine specific exit points. Carter recommends selling when you’ve had two bars in the new color. For example, if the squeeze fires and the bars are light blue (above the zero line and increasing), he recommends selling when you see two dark blue bars (above the zero line and decreasing) in a row.
The Squeeze Momentum PRO can be used in many timeframes. Many chartists look at the same security in multiple timeframes for confirmation. For example, if a squeeze is firing on both a daily and an hourly chart at the same time, that is a stronger signal than a squeeze that is only firing in one timeframe.
The Squeeze Momentum PRO measures both volatility and momentum to spot trading opportunities based on volatility changes in a security. The volatility component of the indicator (the squeeze dots) signals potential breakouts after periods of low volatility. The momentum histogram indicates the likely direction of the breakout and can help to determine exit points.
As with all indicators, traders should use the TTM Squeeze indicator in conjunction with other indicators and analysis techniques.
You can check more info on:
– Book: Mastering The Trade by John F Carter
SCREENSHOTS – Squeeze Momentum PRO for Ninjatrader 8
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