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This indicator is based on a strategy mentioned in John Carter's book,
Mastering the Trade. The basic idea behind the strategy is that markets
tend to move from periods of low volatility to high volatility and visa
versa. The strategy aims to capture moves from low to high volatility.
For gauging this he uses two common indicators - Bollinger Bands and
Keltner Channels (ok, not so common!). He also uses the Momentum indicator
to provide a trade bias as some as the Bollinger Bands come back outside
the Keltner Channels. The Squeeze_Break indicator combines this into a
signal indicator and has the following components:
- A positive green histogram means that the Bollinger Bands are
outside the Keltner Channels and the market is lightly to be trending or
volatile. The stronger the histogram the stronger the directional price
move.
- A negative red histogram means that the Bollinger Bands are inside
the Keltner Channels and the market is lightly to be consolidating. The
stronger the red histogram the tighter price action is becoming.
- Incorporated into the indicator is a Momentum indicator. According
to the strategy J. Carter goes long when the Bollinger Bands break
outside the Keltner Bands and the Momentum indicator is above the zero
line. He goes short when the Momentum indicator is below the zero line.
- I've also added other indicator info in the top left hand corner to
give a broader idea of current market conditions.
- The indicator provides audio alerts when a potential breakout is
occurring. This indicator tends to be better with the larger timeframes.
Personally I don't trade purely on an alert signal alone. It's just a
handy tool for warning me of changes in price action and potential
breakouts.
Example:
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