TTM Squeeze Indicator

I don’t know how many of you are familiar with the Trade the Markets Squeeze indicator but it is designed to take advantage of the quiet periods in the market when volatility has decreased, and the market is building up energy for its next major move higher or lower.  The decreased volatility and quiet period are when the Bollinger Bands are "squeezed" inside of the Keltner Channels.  The setup is triggered when the Bollinger Bands shoot back outside of the Keltner Channel.  Depending on the momentum direction, the play can be short or long. 

This indicator is used by John Carter and was created by his trading partner Hubert Senters.  I really like this indicator and find that during trending markets it works quite well.  The caveat is that it isn’t free.  It can be bought on the tradethemarkets website for around $500.  The great thing is I just wrote the indicator myself over the last 2 hours and am currently using it on my charts.  It was easier than I thought.  I looked at previous videos from Carter and Senters to compare their Squeeze indicator to mine and they are very close.  As far as momentum is concerned, they use a combination of ATR, Momentum, a Linear Regression Plot, and moving averages.  Mine only uses Momentum and MACD at the moment until I kind find out how to combine indicators to represent momentum.

Here is their Squeeze indicator:

 

 

 

 

 

Here is mine:

 

 

 

These are not the same charts but you get the idea.  The red dots indicate that the Bollinger bands are inside the Keltner channels and all is quiet.  The next green dot after a red is when you go short or long depending on the momentum.

You can read more here: Volatility Squeeze Play 

The Forex Project Squeeze isn’t perfect but I like what I see so far.  If anyone is greatly interested in this indicator or have ideas on how to enhance it, let me know.  If you use esignal and you want to try it, it’s free.  

THIS INDICATOR HASN’T BEEN MAINTAINED SINCE 2006.  USE AT YOUR OWN RISK.  IT’S ONLY AVAILABLE FOR ESIGNAL DON’T ASK FOR IT FOR ANY OTHER TRADING PLATFORM.  YOU CAN DOWNLOAD IT AT:

http://www.forexproject.com/forex_documents

 

Popularity: 7%

Forex Open Orders and Bollinger Bands

I placed several orders last night looking for a break of the 60 pip channel in the EUR/USD and USD/CHF but neither were triggered.  I have since removed those orders and will continue to scan the market looking for setups.  Volatility is weak and I don’t see any point in entering the market until these conditions change.  If anything, you have to expect some more volatility after new Fed Chairman Bernanke gives his semiannual monetary policy testimony to House Financial Services Committee Wednesday morning.

I have not had a chance to test my newest setup strategy due to the low volume.  I noticed 2 possible setups last night in Yen crosses but the setup conditions were never met.  This setup strategy involves Keltner channels, exponential moving averages, momentum indicators, and velocity indicators.  I’ll give more details once I’ve had more time to test it. 

I’ve just started using a custom indicator called Velocity.  It performs similar to the Squeeze which was developed by John Bollinger.   Here is a brief description of the Squeeze:

Bollinger Bands employ upper and lower standard deviation bands together with a center simple moving average band around price to identify high and low volatility points. While it can be a real challenge to forecast future prices and price cycles, volatility changes and cycles are relatively easy to identify. This is because equities alternate between periods of low volatility, followed by periods of high volatility, and so on - much like the calm before the storm and the inevitable inactivity afterward. 

Quite simply, when the bands are far apart, volatility is high and when close together, volatility is low.  What we’re looking for is for the bands to be close together and as they begin to separate more, the explosion of volatility and a subsequent breakout.

I find that the velocity indicator is more responsive to impending volatility.  Instead of using standard deviation like the Squeeze, velocity uses weighted moving averages.

Popularity: 2%