Momentum · Indicator
TTM Squeeze flags low-volatility periods where Bollinger Bands contract inside Keltner Channels, with a histogram showing momentum direction.
Overview
The TTM Squeeze was developed by John Carter. It identifies 'squeeze' periods where Bollinger Bands contract inside Keltner Channels, indicating low volatility, and the histogram colour shows momentum direction. These compressions are typically a precursor to explosive breakouts, which is the premise the indicator is built on: markets alternate between periods of contraction and expansion, and a measurable contraction sets up the next expansion.
The squeeze test works because the two envelopes react differently to volatility. Bollinger Bands use standard deviation of closes and contract sharply when closes cluster; Keltner Channels use a smoothed Average True Range and contract more slowly. When the faster-reacting Bollinger Bands fall entirely inside the steadier Keltner Channels, volatility has genuinely compressed rather than merely paused for a bar or two.
The squeeze itself is directionless, which is why the momentum histogram is essential. It is a linear-regression measure of how far price sits from the midpoint of its recent range, and its colour and slope are what traders use to guess which way the compression will resolve. The indicator therefore has two separate readings: a state, squeeze on or off, and a direction.
How it is calculated
Bollinger Bands and Keltner Channels are computed independently with their own lengths and multipliers. The squeeze is on when the upper Bollinger band is below the upper Keltner band and the lower Bollinger band is above the lower Keltner band, meaning the standard-deviation envelope sits entirely inside the ATR envelope. Marker dots on the zero line show the state on each bar.
The momentum value is a linear-regression fit of the difference between the close and a midline, where that midline is the average of the recent range midpoint and the simple moving average of the close. The histogram plots that value, coloured by sign.
Bollinger Bands = SMA(close, BB length) +/- BB multiplier * standard deviation Keltner Channels = EMA(close, KC length) +/- KC multiplier * ATR(KC length) Squeeze on when BB upper < KC upper AND BB lower > KC lower Squeeze off when the Bollinger Bands expand back outside the Keltner Channels Midline = average of ((highest high + lowest low) / 2) and SMA(close, length) Momentum = linear regression of (close - Midline) over the length
Inputs
How to read it
Read the state first. Squeeze-on dots mark bars where volatility has compressed to the point that the standard-deviation envelope fits inside the volatility envelope. Consecutive squeeze-on bars are more significant than isolated ones, since a long compression usually stores more energy than a brief one.
The transition from squeeze on to squeeze off is the event traders watch, often described as the squeeze firing. It marks the bar where Bollinger Bands expand back outside the Keltner Channels, which is the measurable start of a volatility expansion.
Direction comes from the histogram. Traders typically take the direction of the momentum bars at the moment the squeeze fires as the expected direction of the move, and watch for the histogram to keep extending in that direction as confirmation. Bars that shrink towards zero while still on the same side indicate momentum fading even before the colour changes.
Signals to look for
The transition from squeeze on to squeeze off marks the start of a volatility expansion. It is the indicator's primary event and is read together with the histogram for direction.
A long unbroken run of squeeze-on bars is watched more closely than a short one, on the reasoning that a longer period of balance tends to precede a larger move when it resolves.
The momentum histogram crossing zero during or shortly after a squeeze indicates a shift in which side is driving price, and is used as a directional trigger.
Histogram bars contracting towards zero while still on the same side of it indicates the move that followed the squeeze is losing force, which traders use as an early exit reference.
Limitations
Frequently asked questions
TTM Squeeze flags low-volatility periods where Bollinger Bands contract inside Keltner Channels, with a histogram showing momentum direction.
Read the state first. Squeeze-on dots mark bars where volatility has compressed to the point that the standard-deviation envelope fits inside the volatility envelope. Consecutive squeeze-on bars are more significant than isolated ones, since a long compression usually stores more energy than a brief one.
Squeeze fires: The transition from squeeze on to squeeze off marks the start of a volatility expansion. It is the indicator's primary event and is read together with the histogram for direction.
The squeeze indicates compressed volatility only. It contains no directional information at all, and the histogram's read at the moment of firing is frequently wrong.
Related indicators