How to Read the Squeeze Indicator

Getting started using the Squeeze

Reading the Squeeze Indicator

The red and green dots along the zero line indicate if there is a squeeze. A red dot means there is a squeeze condition in effect. A green dot means that we are not currently in a squeeze. The first green dot after one or more red dots is where the squeeze is said to have “fired”.

The histogram indicates momentum. If the histogram is rising / increasing, the histogram will be yellow or cyan / light blue. If momentum is decreasing, the histogram will be red or dark blue.

What is it made of?

The squeeze indicator is a combination of:

• Bollinger Bands
• Keltner Channels
• Momentum Oscillator

During periods of low volatility, Bollinger bands narrow and trade inside Keltner channels. They can only contract so much before it can’t contain the energy it’s been building. When the Bollinger bands come back out, it explodes higher.

How Can You Use It?

1) To time directional moves

2) To stay out of premium selling plays when you believe a big directional move is going to happen

Target?

The price target for the squeeze is usually the 1.272 extension of the swing going into the squeeze zone.

When Can You Use It?

The squeeze can be used on any time frame, on any chart. The key to using it, is just understanding that once the squeeze fires, it usually lasts 8-10 bars.

For example, if the squeeze is on a _ chart, the move will last approximately _.

• 5-minute chart: 5 minutes x 8 = 40 minutes.
• 30-minute chart: 30 minutes x 8 = 240 minutes
• Daily chart: 8-10 days
• Weekly Chart: 8-10 weeks
• Monthly Chart: 8-10 weeks

Settings

You can use the default inputs for the indicator or modify them to suit your needs. The above image should be what you see using the default indicator settings.

Price –Sets what bar price to calculate indicator based on; default is close.
SymbolType–Futures=1, Stocks=2, Forex=3.
Length–Number of bars used in the indicator calculation; default is 20.
nK–Sets the offset of the Keltner Channel; default is 1.5.
nBB–Sets standard deviation of the Bollinger Bands; default is 2.
AlertLine–Leave set to default value of 1.
NormalColor–Sets the dot color when squeeze settings are met.
AlertColor–Sets the dot color when squeeze settings are no longer met and squeeze has fired.
HistabvZeroUpColor–Sets the color of histogram bars when above zero momentum is increasing.
HistabvZeroDwnColor–Sets the color of histogram bars when above zero momentum is decreasing.
HistblwZeroFallColor–Sets the color of histogram bars when below zero momentum is decreasing.
HistblwZeroRiseColor–Sets the color of histogram bars when below zero momentum is increasing.
SqueezeAlert –Turns on or off the Squeeze audio alert.
CrossAlert –Turns on or off the alert for when momentum crosses the zero line.