I would like to share one of the most popular indicators on TradingView called Squeeze Momentum Indicator done by LazyBear. This implementation is derived from the John Carter TTM Squeeze indicator that he discussed in his book “Mastering the Trade”. It uses Bollinger Bands and Keltner Channels to determine when a squeeze is happening.

I'm sharing just the indicator here in the hopes of getting the community to offer improvement suggestions of how this can be done better.

The backtest if ran on QC will result in this chart that can show the same visualisation:

189305_1661166782.jpgThe Squeeze Chart

Some issues:

  • The indicator momentum values seem to be off by 1 day compared to TradingView.

 

Trade idea (on how it can be used):

  • Buy Calls on the first GREEN dot (when squeeze starts) if bullish momentum (Aqua bars)
  • Buy Puts on the first GREEN dot (when squeeze starts) if bearish momentum (Red bars)
  • When momentum changes from Aqua to Blue close Calls, from Red to Yellow close Puts.
  • Other more aggressive tests would be to enter a position early when red dot changes to black (high squeeze to low squeeze) and increase position when it changes to green dot (squeeze released/no squeeze)
  • Take profit early (while testing this strategy manually) as i noticed that if you get a big momentum change day the whole option value can go to even very fast.