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Key Takeaways
- The squeeze is on when the upper Bollinger Band is below the upper Keltner band and the lower Bollinger Band is above the lower Keltner band.
- A release is the first completed bar that changes from inside both boundaries to failing that containment test.
- The squeeze state says volatility is compressed; the momentum histogram says which way the pressure leans.
- John Carter popularized the setup. Its settings are study conventions, so confirm the lengths and multipliers your platform uses.
- Inspect contract prices, implied volatility and expiration when selecting an options structure around the price setup.
- Define the release bar, price trigger, invalidation, position size and exit before acting on the setup.
What is the TTM Squeeze?
The TTM Squeeze is a volatility indicator that flags when Bollinger Bands sit inside Keltner Channels, a low-volatility condition, and pairs that on or off state with a momentum histogram. The squeeze fires on the first completed bar after an inside state that fails the containment test. John Carter popularized the setup.
The state tells you volatility is compressed, and the histogram tells you which way momentum leans. A trading rule needs both, plus a price trigger.
How is the TTM Squeeze calculated?
Both envelopes share an SMA(20) center. Bollinger offsets are 2 × population standard deviation of the last 20 closes. Keltner offsets are 1.5 × Wilder ATR(20).
The squeeze is on when Bollinger upper < Keltner upper and Bollinger lower > Keltner lower. With this shared center, that reduces to 2 × standard deviation < 1.5 × ATR.
A release is the first completed bar after an inside state that no longer satisfies both strict inequalities. If the two envelopes use different centers, evaluate both boundaries directly.
Formula
Squeeze is on when upper Bollinger Band < upper Keltner Channel and lower Bollinger Band > lower Keltner Channel- Bollinger Bands use a 20-period simple moving average plus and minus 2 standard deviations of closing price by default.
- Here both envelopes share the SMA(20) center, and the Keltner offset is 1.5 × Wilder ATR(20).
- With a shared center, the strict containment test is 2 × population standard deviation < 1.5 × ATR. With different centers, compare both boundaries directly.
- A wider Bollinger multiplier or a narrower Keltner multiplier makes the squeeze rarer, so fix both before comparing signals.
Worked Example
Read two completed bars with a shared SMA(20) center of $100. On the first, population standard deviation is $0.90 and Wilder ATR(20) is $1.40. On the later bar, the center is still $100, standard deviation is $1.60 and ATR is $1.42.
- Bollinger Bands: $100.00 +/- (2 × $0.90) = $98.20 and $101.80
- Keltner Channels: $100.00 +/- (1.5 × $1.40) = $97.90 and $102.10
- Squeeze test: $101.80 < $102.10 and $98.20 > $97.90, so the squeeze is on
- Later bar: shared center $100, standard deviation $1.60 and ATR $1.42
- New upper Bollinger Band: $100.00 + (2 × $1.60) = $103.20, above the $102.13 upper channel
On the first bar, Bollinger offsets of $1.80 sit inside Keltner offsets of $2.10: the squeeze is on. On the later bar, Bollinger offsets of $3.20 sit outside Keltner offsets of $2.13, so volatility has expanded; the first bar in between that fails the test is the release, and the momentum histogram gives its direction.
What changes the squeeze state?
Containment compares two envelope sizes and positions, and at a shared center it comes down to the ratio of the offsets: standard deviation can rise or ATR can fall, and either one ends the squeeze.
For example, standard deviation $1 and ATR $1.40 give offsets of $2 and $2.10, which satisfy containment. If standard deviation stays $1 while ATR becomes $1.33, the Keltner offset drops to $1.995, just under the $2 Bollinger offset, and the inside state ends.
The worked bars use a $100 center. The first Bollinger bands are $98.20 and $101.80 inside Keltner bands of $97.90 and $102.10. The later Bollinger bands are $96.80 and $103.20 outside Keltner bands of $97.87 and $102.13.
TTM Squeeze momentum histogram and release example
For each bar, subtract the average of the 20-bar high-low midpoint and SMA(20) from the close. Fit a least-squares line to the latest 20 of those detrended values and use its endpoint as the histogram value.
Read sign and change separately: positive and rising, positive and falling, negative and rising, or negative and falling. Platform histograms use their own momentum and display conventions, so compare readings on one platform.
The chart stays in the squeeze state through bar 15. At bar 16, the Bollinger offset is $2.00 and the Keltner offset is $1.72. The histogram rises from 0.61 to 1.07 as the release occurs.
How to trade a TTM Squeeze release
Choose the required squeeze duration, release condition and price trigger. Specify the decision bar, invalidation, size and exit. For a multi-interval rule, align the decision with completed bars on each interval.
The squeeze marks compressed volatility, and the Options Profit Calculator prices the release: set the target, the invalidation and a higher volatility input, and compare what each structure pays.
Limitations of the TTM Squeeze
- Take direction from the momentum reading and the price trigger. The squeeze state measures compression, and the break can go either way.
- Fix the lengths, multipliers, standard deviation type, ATR smoothing and envelope centers before you compare charts: each one moves the state, and platforms compute momentum their own way.
- Check how close the two offsets sit before you count on the state. It rests on a ratio, so a small input change can flip it: with standard deviation at $1, ATR falling from $1.40 to $1.33 ends the squeeze.
- Act on the completed release bar. Every input is a trailing calculation over past bars, so the state changes after volatility has already shifted, and the release confirms only when the bar closes.
Bottom line
The TTM Squeeze flags volatility compression by testing whether Bollinger Bands sit inside Keltner Channels, then adds a momentum histogram for direction. State the lengths and multipliers, treat the release as a timing condition rather than a directional call, and pair it with a defined price trigger, stop and exit.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- thinkorswim Learning Center: TTM Squeeze study
- Fidelity Technical Indicator Guide: Bollinger Bands
- Fidelity Technical Indicator Guide: Keltner Bands
- Fidelity Technical Indicator Guide: Average True Range
How entries are sourced, calculated and updated: editorial methodology.