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Squeeze momentum indicator4/30/2024 ![]() ![]() Importance of Squeeze Momentum in Technical Analysis Therefore, traders are advised to practice proper risk management and conduct extensive testing before using Squeeze Momentum in their trading. Also, as financial markets are inherently unpredictable, there is always inherent risk in trading any indicator. ![]() It is important to note that, like any indicator, Squeeze Momentum is not foolproof and should be used in conjunction with other tools and analytics to make informed trading decisions. On the other hand, if the histogram crosses below zero and breaks out of the squeeze, it is considered a bearish or sell signal. When the momentum histogram crosses above zero and breaks out of the squeeze, it is considered a bullish or buy signal. This creates a consolidation or "squeeze" zone on the chart, signaling a potential burst of volatility and significant price movement. During periods of low volatility, the Bollinger Bands will move closer to the Keltner Channels, and the momentum histogram will be compressed. The operation of Squeeze Momentum is based on the behavior of Bollinger Bands and Keltner Channels. It represents the difference between Bollinger Bands and Keltner Channels. Momentum Histogram: This is the key component of the indicator and is displayed as a histogram at the bottom of the chart.These lines are usually calculated from an exponential moving average. Keltner Channels: These are two lines that are also drawn around the price and are based on the average volatility of the asset.Generally, two standard deviations above and below a moving average are used. Bollinger Bands : These are two lines that are drawn around the price and are based on the standard deviation of the price.The indicator combines three main components: When volatility is low, price movements are limited, and this can anticipate a more significant next move. During these phases, the market is "compressing", similar to how a spring compresses before releasing its energy. Squeeze Momentum is designed to identify periods of low market volatility, indicating a phase of consolidation or price tightening. It was developed by John Carter and was popularized in his book "Mastering the Trade". The " Squeeze Momentum " (or Squeeze Momentum Indicator) is a technical indicator used in financial analysis and more specifically in technical analysis of markets such as stocks, forex, futures, and cryptocurrencies. What is Squeeze Momentum and how does it work? ![]()
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