The forex market is rewarding with the use of technical indicators and forex signals. As a forex trader, if you can predict the rate of change of an asset price (asset momentum), you’d know precisely when to enter or exit a trade position. And therefore, using the Squeeze Momentum Indicator will help.
Momentum describes the rate of change of a currency pair in real-time. It helps traders to determine how fast or slow the price of an asset is fluctuating. You cannot accurately predict asset momentum (a change in an asset price) just by studying charts and analyzing different graphs. You need a momentum indicator that would notify you whenever there is a change in the price of an asset you intend to trade.
Momentum indicators work by mathematically calculating the rate of change of a currency pair price and thus can measure how weak or strong a market trend is. While there is a wide range of technical indicators designed to predict momentum, one momentum indicator you need to try out is the Squeeze Indicator.
What Is Squeeze Momentum Indicator?
The Squeeze Momentum Indicator is a custom technical indicator developed on the premise that price compression usually leads to price increment.
The Squeeze indicator tells traders how weak or strong the market trend is to determine when to enter or exit a trade position. The Indicator has helped thousands of traders to make continuous profits and improve their trading strategies.
How The Indicator Was Built
The developer used three components to build the Indicator – Bollinger bands, Keltner channels, a momentum indicator. The first two components are responsible for triggering the green and red dots. The market is said to be in a squeeze when the Bollinger bands go inside the Keltner channel.
During a squeezed market, the squeeze indicator’s dots that are across the zero lines will automatically turn red; meaning, there is a market compression. Conversely, once the Bollinger bands go outside of the Keltner channel, the Indicator’s dot till turns green – meaning the Indicator has “fired”.
The third component used to develop the Squeeze indicator is the momentum indicator. The momentum indicator helps to determine the direction of the move. If the momentum indicator’s bar is positive, it means the Squeeze indicator has fired long. Similarly, if the momentum indicator’s bar is negative, it means the Squeeze indicator has fired short.
How To Use The Indicator
The green and red dots along the Indicator’s zero line signify that the market is in a squeeze. While a green dot means the market is currently not in a squeeze, the red dot means the market is in a squeeze. The Squeeze Indicator is said to have fired when a green dot appears after several red dots.
Additionally, the histogram represents momentum. The histogram will be light blue or yellow if it is rising or increasing. If it is decreasing, then the histogram will be dark blue or red.
What about Target? The Squeeze indicator’s price target is projected to be the 1.272 extensions of the swing that is moving towards the squeeze zone.
Perfect Time To Use The Indicator
The Squeeze Momentum Indicator works well on any timeframe on the chart. The most important information to have in mind is that when the indicator fires, the histogram usually lasts 8 to 10 bars.
How To Install The Indicator
Below are the steps to install the Squeeze indicator:
1. Right-click on the chart you wish to install the Indicator
2. Select “insert analysis technique.”
3. Click on “Squeeze” from the list of the drop-down.
4. Click “OK” and restart the chart.
5. The Indicator should appear on your chart.
The Settings Of The Indicator
The default settings will still work very well for you. But if you need a more personalized experience, you need to adjust the settings to suit your trading preferences. Some of the settings you can adjust are:
1. Price: The default price is usually close. You can set the price at which the Indicator will start the calculation.
2. Symbol Type: Forex = 1, Stocks = 2, and Futures = 1.
3. Length: You can set the number of bars that would be involved in the calculation
4. nK- The default setting for this is 1.5. You can adjust the offset of the Keltner channel.
5. nBB: This is Bollinger band’s standard deviation setting
6. NormalColor: You can set the color of the dot
7. Alert Color: Alert color can also be adjusted once the indicator fires
8. SqueezeAlert: You can turn on or off the audio alert system
Final Thoughts On Squeeze Momentum Indicator
The Squeeze Momentum Indicator is one Indicator you should have in your trading arsenal. It can help you determine the rate of change of asset price so that you know exactly when to place a buy or sell order.
While never use the Indicator in isolation. Here on our website, we have several technical metatrader indicators you can combine the Squeeze indicator with to increase your earning potentials, so check it via this link. Combining the Squeeze indicator with other indicators will also help to improve your trading strategies.