Squeeze indicator explained: Bollinger Bands inside Keltner Channels
A squeeze is a market gone quiet, measured two ways at once. This guide is what the squeeze reads, what its momentum histogram adds, what its three settings change, and the conditions you can build in SixOne8 — including the one most people want, the bar the squeeze releases.
What the squeeze measures
Two channels are drawn around the same simple moving average of closes. The Bollinger Bands sit a number of standard deviations of the close either side of it; the Keltner Channel sits a number of average true ranges either side. When a market goes quiet, the spread of its closes collapses faster than the range of its bars, so the Bollinger Bands contract until both sit inside the Keltner Channel. That is the squeeze: on while the bands are inside, off when either band reaches or passes the channel's edge.
The indicator also carries a momentum histogram, which reads which way price is leaning. On each bar, the close is measured against the midpoint between the period's Donchian midline (the highest high and lowest low, halved) and its moving average; a straight line is fitted through those distances, and the reading is where that line ends. Positive means price is leaning above its recent middle, negative below. The idea is John Carter's, and the builder lists it under the name he gave it, TTM Squeeze.
Squeeze settings
- Period. The number of bars the bands, the channel and the momentum are all measured over — 20 by default.
- Bollinger Std Dev. How many standard deviations of the close the bands sit from the average — 2 by default. A smaller number makes the bands narrower, so they sit inside the channel more often.
- Keltner ATR Multiplier. How many average true ranges the channel sits from the average — 1.5 by default. A larger number widens the channel, so the bands sit inside it more often.
Two details match some charting platforms and not others. The standard deviation is the population form, and the channel uses a simple average of true range rather than Wilder's smoothing. A squeeze needs both bands strictly inside, so a market with no movement at all reads as not squeezed rather than squeezed by a tie.
How to use the squeeze in a strategy
These are the comparisons SixOne8 offers, in the builder's own words.
- Squeeze is on. True for every bar the bands sit inside the channel. A state, so an alert fires when the strategy first becomes satisfied.
- Squeeze releases. True only on the bar the bands leave the channel, having been inside it the bar before. The usual choice for the condition that triggers a strategy.
- Squeeze is off. True for every bar at least one band is on or beyond the channel's edge.
- Momentum above zero / below zero. The histogram's side of zero — which way price is leaning.
- Momentum rising / falling. The histogram is higher, or lower, than the bar before.
Squeeze(20) on 1h · squeeze releases
Squeeze(20) on 1h · momentum above zero
Together they read: on the 1-hour chart, the quiet stretch has just ended and price is leaning upwards as it does. The chart in the builder draws the histogram; the squeeze itself shows as the bars the condition was met on, rather than as a line of its own.
What a squeeze release does not say
A release says only that the spread of closes has grown back to the width of the bars' range. It carries no direction, which is why it is usually paired with the momentum, and it does not have to arrive with a sharp move: a quiet market can drift out of a squeeze over several bars and release on an unremarkable one. On a fast timeframe squeezes come and go often, and a release followed straight away by another squeeze is common.
The look-back is two periods — forty bars on the default — because each of the twenty distances the momentum line is fitted through needs its own twenty-bar midline behind it.
Does the squeeze work on your market?
Run an entry check. It will tell you whether, on the market you care about, the bars a release fired on moved any differently from a random bar over the history tested. That is a fact about the past on that market, and it is the only kind of fact a test here produces.