Ethereum Squeeze Momentum Indicator
The Squeeze Momentum Indicator is a technical analysis tool that measures price momentum using a combination of Bollinger Bands and Keltner Channels. This implementation focuses on the momentum histogram, which provides clear visual signals for trend direction and strength.
How It Works
The indicator calculates momentum by comparing current prices to a baseline derived from:
- Bollinger Bands: Based on standard deviation of price
- Keltner Channels: Based on Average True Range (ATR)
Momentum Histogram
The colored histogram bars show the direction and strength of price momentum:
- Green bars: Positive momentum (bullish pressure)
- Red bars: Negative momentum (bearish pressure)
- Bar height: Magnitude of momentum
- Color intensity:
- Bright colors: Accelerating momentum
- Dark colors: Decelerating momentum
Trading Insights
Momentum Signals
- Rising green bars: Increasing bullish momentum
- Rising red bars: Increasing bearish momentum
- Momentum peaks: Often coincide with short-term price reversals
- Zero-line crosses: Indicate momentum shifts from bullish to bearish or vice versa
Key Patterns
- Momentum divergence: When price makes new highs/lows but momentum doesn't, suggesting potential reversal
- Momentum acceleration: Bright colored bars indicate strengthening trends
- Momentum deceleration: Dark colored bars suggest trend exhaustion
Best Practices
- Use higher timeframes for more reliable signals
- Look for momentum confirmation with price action
- Watch for divergences between price and momentum
- Combine with support/resistance levels for better timing
Parameters
- BB Length: Bollinger Bands period (default: 20)
- KC Length: Keltner Channels period (default: 20)
- Range Type: True Range calculation for Keltner Channels
The momentum histogram is particularly effective at identifying trend strength and potential reversal points when used alongside price action analysis.
