TTM Squeeze Indicator

We always see the markets trending higher or lower. However, a third state called consolidation indicates the beginning of a fresh trend. The TTM Squeeze indicator helps you gauge the trend earlier. In this article, I’ll shed some light on the use of this indicator along with a simple TTM Squeeze trading strategy which you can try on a demo account.

What is the TTM Squeeze Indicator?

John Carter from Trade the Market is the author of the TTM Squeeze indicator. The indicator reveals the market’s volatility and momentum. It takes advantage of a sudden change in the trading conditions that creates trading opportunities. Here’s how the indicator looks on the chart.

TTM Squeeze indicator on the chart
TTM Squeeze indicator on the chart

The indicator uses Keltner and Bollinger Bands to assess the market consolidation. The Keltner encapsulates the Bollinger Bands completely. This is the condition when a squeeze occurs. The indicator alerts the traders when a breakout occurs after the squeeze.

TTM Squeeze Strategy

You can use TTM Squeeze for trading pullbacks or consolidation breakouts. It is quite similar to the MACD when you see it on the charts and has similar functions. Let’s take a look at the settings of the indicator:

TTM Squeeze indicator setting
TTM Squeeze indicator setting

You can change the values of Keltner or Bollinger in the settings. However, default settings can be smoothly used. Only alter the settings if you know what you are doing and like to experiment with technical indicators. I usually find the default settings are set that way for a reason, so tend to stick to them more often than not.  Lower settings will mean more signals, but that will probably decrease the reliability.

The indicator comprises both volatility and momentum. The Squeeze dots tell you if the trading conditions are suitable for buying or selling. The motion histogram suggests when to go short (sell) or long (buy). The histogram’s purpose is to determine the trade’s direction.

You can go for a long trade if the momentum rises above the zero line. Similarly, you can look for a short trade when the momentum drops below the zero line. Mostly, a price swing remains in action for 8 to 10 bars. Once the histogram changes its direction, it hovers around the zero line. This is the time to find a reversal trade opportunity.

Buy Signal

Let’s take a look at the buy setup of TTM Squeeze.

  • Wait for the histogram bars to turn green from red.
  • The squeeze dots should change color from blue to magenta.
  • The price should close with a bullish candle.
  • You could enter long trade then.
  • You could place stop-loss around recent swing lows.
  • You could keep the take profit at least twice your stop-loss.
TTM Squeeze indicator buy setup
TTM Squeeze indicator buy setup

Sell Signal

Let’s take a look at the sell setup of TTM Squeeze.

  • Wait for the histogram bars to turn red from green.
  • The squeeze dots should change color from blue to magenta.
  • The price should close with a bearish candle.
  • You could enter short trade then.
  • You could place stop-loss around recent swing lows.
  • You could keep the take profit at least twice your stop-loss.
TTM Squeeze indicator sell setup
TTM Squeeze indicator sell setup

Conclusion

The TTM Squeeze indicator can be a good companion for traders. However, bear in mind that the indicator may have a lag which means you can be late to the party and get caught out if you are not careful. Hence, the efficacy may not be as good as price action strategies which tell you exactly what the market is doing at any given moment. You could combine the TTM Squeeze with price action analysis and good money management to get the best out of it. It is vital for traders to run a forward test on the demo before implementing the strategy on the alive account. This way you can practice using the TTM Squeeze strategy and see if it is something that produces consistent results for you without taking any unnecessary risks.