What's A Squeeze Trade?
The Squeeze trade is an extremely simple yet effective trade setup. It can be applied to Stocks, Indexes,
Options, Futures, and Forex markets. It doesn't matter what you're looking at, the squeeze play will work
anywhere. It can also be applied to any timeframe successfully, including 1 minute or 5 minute charts for day
trading, all the way up to 1 month charts for long term investments.
In general, the squeeze is an indication of volatility compression in the markets (a stock is consolidating and
getting ready for a big move). It visually represents when a market turns from consolidating to trending. When a
squeeze indicator fires off it provides the experienced trader with a unique opportunity to take profits while
Let's take a look at how the squeeze trade works.
Above is a Daily chart of AAPL where 1 bar is 1 trading day. The two red lines represent Bollinger Bands (on
default settings in Think or Swim) and the 2 green lines represent the Keltner Channels. The middle band in both
of these studies was removed to de-clutter the image.
To find a squeeze trade we look for consolidation periods in the market where there is low volatility and the
market is building up energy to make a big move either up or down. We can see the beginning of a consolidation
period when the Bollinger Bands enter completely inside of the Keltner Channels, as indicated at the point
marked "1". This is not a signal to buy the stock, this is merely a warning sign that at some point in the near future
the market will provide us with a buy signal meaning it's time to enter a trade and take profits.
At point 2 that buy signal occurs. You can see how at point 2 the Bollinger Bands exit the Keltner Channels while
the stock price has a strong upward momentum. This is a bullish squeeze. We enter the trade and set our trailing
stop loss wide enough that it filters out any market noise, but keep it tight enough that should a trend change
occur we are immediately taken out of the trade.
Following the squeeze trade setup this trade initiated a buy signal at $97.65 and reached a maximum of $112.3
before reversing its upward trend. That's a gain of 15% for stock traders, and nearly 400% profit for Option
When a squeeze fires off it will typically multiply the Average True Range (ATR) of a stock by 2-4 times its normal
value. When this happens, traders using candlestick patterns, RSI, or pivot point indicators get destroyed. If
a squeeze is in play, all other bets are off. The squeeze is like a freight train that overpowers almost all other
technical indicators out there, and that's why it's the primary focus of the Market Prowler Newsletter.
"In The Stock Market Jungle
We Give You A Predator's Edge"
Want to see Squeeze Trade Examples?
Be sure to check out our squeeze trade examples to
learn how to use this powerful indicator and what the
profit potentials are.
Market Prowler Members
Market Prowler Members receive a weekly newsletter with stock scans showing freshly fired off squeezes in
stocks across varying price ranges and time frames. With the information provided to you in Market Prowler you
won’t miss the opportunity to trade a squeeze ever again!
Indicators That Compliment The Squeeze
In our Indicator Database we offer several indicators
meant to use with the squeeze trade. Be sure to head
over there and download them to help improve your
The Intelligent Trader
To learn more about basic and advanced uses of The Squeeze
covers both this trade setup and many more in depth. This book
takes readers from the beginer level all the way up to the
professional technical analyst level step by step with easy to
follow lessons and examples.