What it does
Volatility Squeeze Momentum highlights periods when volatility has contracted unusually far and shows which way momentum is leaning as that contraction ends. A row of dots on the zero line shows the squeeze state, and a histogram shows momentum.
- Orange-red dot: squeeze on (Bollinger Bands are inside the Keltner Channel).
- Blue dot: the first bar after a squeeze ends, the release.
- Grey dot: no squeeze.
The histogram is bright green when momentum is positive and rising, dark green when positive but falling, bright red when negative and falling, and dark red when negative but recovering.
How it works
All parts use the same length (20 by default):
- Basis = simple moving average of the close. Bollinger Bands = basis ± 2 × population standard deviation of the close.
- Keltner Channel = basis ± 1.5 × the simple average of true range.
- Squeeze on when the upper Bollinger Band is below the upper Keltner line and the lower Bollinger Band is above the lower Keltner line.
- Momentum source = close − ((highest high + lowest low) ÷ 2 + basis) ÷ 2, using the last 20 bars.
- Momentum = the value at the newest bar of a least-squares regression line fitted through the last 20 source values. This smooths the series while keeping it responsive.
An alert fires on the first closed bar where the squeeze switches from on to off and states whether momentum is positive or negative.
How to use it
- A run of orange-red dots means price is coiling. The longer the run, the more attention the eventual release tends to get from traders.
- On release, the histogram's side of zero gives the momentum bias. Bright colours show acceleration; dark colours show it fading.
- Many traders wait for price to break a clear level, for example the range high or low formed during the squeeze, before acting.
- The Bollinger Bands and Volatility lessons explain the ideas behind the bands.
- It works on any instrument; H1 to D1 give fewer, more meaningful squeezes than very short timeframes.
Settings
| Input | Default | What it changes |
|---|---|---|
| Length | 20 | Window for both bands and the momentum regression |
| Bollinger Band standard deviations | 2.0 | Lower values make squeezes rarer |
| Keltner Channel ATR multiplier | 1.5 | Higher values make squeezes more common |
| Pop-up alert / Push notification | false / false | One alert per closed bar when a squeeze releases |
Limitations
- A squeeze says volatility is low, not which way it will expand. Releases can fail or reverse soon after.
- Momentum direction at release often flips during the first few bars of a breakout.
- The band multipliers interact: small changes can turn squeezes on or off across the whole chart.
- The live bar's dot and histogram change with each tick. The release alert waits for the bar to close.
- Breakouts can come with wider spreads and slippage. Plan risk before any trade; trading involves substantial risk of loss.