Squeeze Break Indicator

The Squeeze Break Indicator is an MT4 trend indicator. It determines potential price breakouts during sluggish market trends.

The price often makes aggressive movements in a definite direction once it breaks out of a consolidation range. Technical experts capitalize on such market conditions by entering buy/sell orders within the price breakout direction.

Horizontal support/resistance, Fibonacci levels, and trendlines guide you through correct price breakout levels. However, you always need an additional tool to research the price momentum. The level of momentum’s strength determines the solidity of potential price breakouts.

This guide will explain how to trade forex and stocks using the Squeeze Break Indicator.

What is the Squeeze Break Indicator?

The Squeeze Break Indicator applies a unique trading technique that was first introduced in “Mastering the Trade,” a book by John Carter. It portrays a unique trading method that enables you to predict a price movement following a ranging market.

Technically, the price either rejoins the current trend or plots a trend reversal at the end of a flat-trend market period. The Squeeze Break histogram bars and signal line help determine the upcoming trends during such price consolidation periods.

Squeeze Break Indicator Chart Setup
Squeeze Break Indicator Chart Setup

Histogram bars above zero and plots in a rising pattern signal a strong bullish momentum. If the bars appear in a larger form below the zero level, we’ll consider the momentum as strongly bearish. Also, the bars switch their colors between green and red to show the changes in market bias.

Additionally, the blue signal line determines valid trend reversal positions of the price. For example, the price breaking above the current consolidation range while the signal line exceeding zero indicates a valid bullish breakout.

Combining the signal line and the histogram bars eliminates market noise, helping you avoid weak trade signals and premature exits. For example, you have activated a buy order following a bullish price breakout. In such a case, you may hold on to the entry until both histogram bars and the signal line drops below zero.

Squeeze Break Trading Strategy

Buy Signal

  • The price plots a bullish breakout of its recent consolidation range.
  • Squeeze Break histogram bars turn green and keep rising above zero.
  • The blue signal line exceeds the zero level.
  • Hold the long position until both histogram bars and signal line move below zero.
Squeeze Break Indicator Buy Signal
Squeeze Break Indicator Buy Signal

Sell Signal

  • The price plots a bearish breakout of its recent consolidation range.
  • Squeeze Break histogram bars turn red and keep falling below zero.
  • The blue signal line drops below the zero level.
  • Hold the short position until both histogram bars and signal line move above zero.
Squeeze Break Indicator Sell Signal
Squeeze Break Indicator Sell Signal

Squeeze Break Indicator Pros/Cons

Pros

  • Determines highl potential price breakouts.
  • Generates precise trend reversal signals.
  • Shows momentum’s strengths and weaknesses.

Cons

  • Doesn’t outline key price levels.

Conclusion

The Squeeze Break Indicator can alone provide you with all the information you need about the market trend and price momentums. Although, you may require to add price level analysis tools such as Fibonacci, regular support/resistance, or trendlines to assess the trade entry levels. Only look for fresh trading opportunities when the price action matches the correct trend signal.