Keltner channels and the squeeze

What it is

Keltner channels were first described by Chester Keltner in 1960; the modern version, popularised by Linda Raschke, is a 20-period EMA with bands 2 ATRs above and below. Because they use ATR rather than standard deviation, they're smoother than Bollinger Bands.

The squeeze, from John Carter's TTM Squeeze, is when the Bollinger Bands contract inside the Keltner channels: volatility is unusually low, and a bigger move often follows. LazyBear's Squeeze Momentum script on TradingView, one of the most-liked free indicators there, adds a momentum histogram to show the likely direction.

How to spot it

• Squeeze 'on': Bollinger Bands inside the Keltner channels.
• Squeeze 'fires': the bands expand back outside.

How to use it

• Prepare for a breakout while the squeeze is on, and trade the direction it fires in.
• Use Keltner bands as trend pullback areas: the EMA and the inner band.

Common mistakes

• Guessing the direction before it fires.
• Expecting every squeeze to give a big move.

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