The Squeeze Momentum Indicator (SMI) combines Bollinger Bands (volatility) and Keltner Channels (momentum) to identify periods when the market is "squeezed" - consolidating with low volatility before explosive moves. Black dots/momentum changes signal upcoming breakouts.
Key Use: Time explosive breakouts by detecting low-volatility consolidation periods.
Squeeze = When Bollinger Bands are inside Keltner Channels
Momentum = Linear regression of (Close - SMA(Close, 20))
When squeeze ends, momentum determines direction
Squeeze Active (Black)
Low volatility - prepare for breakout.
Squeeze Released (Color)
Momentum fires - direction shown by color.
Bollinger Bands: 20-period, 2 std dev
Keltner Channels: 20-period EMA, 1.5 ATR
Momentum: 20-period momentum with LR
Breakout Trading
Enter on squeeze release with momentum confirmation.
Volatility Management
Avoid trading during squeeze; scale up post-squeeze.
Trend Confirmation
Momentum color confirms direction of breakout.
✓ Advantages
⚠ Limitations