Squeeze Momentum Indicator Strategy [LazyBear + PineIndicators] by PineIndicators
By PineIndicators
Performance Metrics
- Author: PineIndicators
- Symbol: SP:SPX
- Timeframe: 30 minutes
- Net P&L: +22,973,031.41 USD (+2,297.30%)
- Win Rate: 51.6%
- Profit Factor: 1.621
- Max Drawdown: 8,770,907.25 USD (36.19%)
- Total Trades: 275
- Sharpe Ratio: 0.323
Description
The Squeeze Momentum Indicator Strategy (SQZMOM_LB Strategy) is an automated trading strategy based on the Squeeze Momentum Indicator developed by LazyBear, which itself is a modification of John Carter's "TTM Squeeze" concept from his book Mastering the Trade (Chapter 11). This strategy is designed to identify low-volatility phases in the market, which often precede explosive price movements, and to enter trades in the direction of the prevailing momentum.Concept & Indicator BreakdownThe strategy employs a combination of Bollinger Bands (BB) and Keltner Channels (KC) to detect market squeezes:Squeeze Condition:When Bollinger Bands are inside the Keltner Channels (Black Crosses), volatility is low, signaling a potential upcoming price breakout.When Bollinger Bands move outside Keltner Channels (Gray Crosses), the squeeze is released, indicating an expansion in volatility.Momentum Calculation:A linear regression-based momentum value is used instead of traditional momentum indicators.The momentum histogram is color-coded to show strength and direction:Lime/Green: Increasing bullish momentumRed/Maroon: Increasing bearish momentumSignal Colors:Black: Market is in a squeeze (low volatility).Gray: Squeeze is released, and volatility is expanding.Blue: No squeeze condition is present.Strategy LogicThe script uses historical volatility conditions and momentum trends to generate buy/sell signals and manage positions.1. Entry ConditionsLong Position (Buy)The squeeze just released (Gray Cross after Black Cross).The momentum value is increasing and positive.The momentum is at a local low compared to the past 100 bars.The price is above the 100-period EMA.The closing price is higher than the previous close.Short Position (Sell)The squeeze just released (Gray Cross after Black Cross).The momentum value is decreasing and negative.The momentum is at a local high compared to the past 100 bars.The price is below the 100-period EMA.The closing price is lower than the previous close.2. Exit ConditionsLong Exit:The momentum value starts decreasing (momentum lower than previous bar).Short Exit:The momentum value starts increasing (momentum higher than previous bar).Position SizingPosition size is dynamically adjusted based on 8% of strategy equity, divided by the current closing price, ensuring risk-adjusted trade sizes.How to Use This StrategyApply on Suitable Markets:Best for stocks, indices, and forex pairs with momentum-driven price action.Works on multiple timeframes but is most effective on higher timeframes (1H, 4H, Daily).Confirm Entries with Additional Indicators:The author recommends ADX or WaveTrend to refine entries and avoid false signals.Risk Management:Since the strategy dynamically sizes positions, it's advised to use stop-losses or risk-based exits to avoid excessive drawdowns.Final ThoughtsThe Squeeze Momentum Indicator Strategy provides a systematic approach to trading volatility expansions, leveraging the classic TTM Squeeze principles with a unique linear regression-based momentum calculation. Originally inspired by John Carter’s method, LazyBear's version and this strategy offer a refined, adaptable tool for traders looking to capitalize on market momentum shifts.