This is a derivative of John Carter’s
“TTM Squeeze” volatility indicator, as discussed in his book “Mastering the Trade” (chapter 11).
Black crosses on the midline show that the market just entered a squeeze
( Bollinger Bands are with in Keltner Channel).
This signifies low volatility , market preparing itself for an explosive move (up or down).
Gray crosses signify “Squeeze release”.
Mr.Carter suggests waiting till the first gray after a black cross, and taking a position in the
direction of the momentum (for ex., if momentum value is above zero, go long).
Exit the position when the momentum changes (increase or decrease – signified by a color change).
Mr. Carter uses a simple momentum indicator, here’s a linreg based method to plot the histogram.
– Book: “Mastering The Trade by John F Carter”
The appendix contains two versions of the source code:
- MetaTrader 5
- NinjaTrader 8