Squeeze Breakout Strategy [KedArc Quant]

Description:

Squeeze Breakout strategy looks for volatility compression (Bollinger Bands inside Keltner Channels = a “squeeze”), then trades the volatility expansion in the direction of a momentum filter.

🧠 How the “Squeeze → Expansion” works

- Markets alternate between quiet (compressed) and active (expanded) phases.
- We call it a squeeze when Bollinger Bands (BB)—which reflect standard deviation around price—shrink inside the Keltner Channels (KC)—which reflect ATR/range.
- This means dispersion (stdev) is small relative to typical range (ATR). Price is coiling; participants are agreeing on value.
- When BB pops back outside KC, the squeeze releases. That’s the first sign that volatility is expanding again.
- A release alone doesn’t tell you direction. That’s why this strategy pairs the release with a momentum filter:
- We estimate momentum using a smoothed linear-regression slope of price (a clean proxy for acceleration).
- If the slope is positive at release, we favor longs; if negative, we favor shorts.
- Optionally, you can require Band Break + Momentum (price closes beyond the BB) for a stricter entry.
- This combination aims to capture the first leg of the range-to-trend transition while avoiding random pokes that often occur during tight consolidations.

💡 Why this is unique
Two entry modes (toggle):
1. Release + Momentum (enter when the squeeze turns off)
2. Band Break + Momentum (enter on a close beyond BB with momentum)
- Momentum = smoothed linear-regression slope, a clean thrust detector that’s less laggy than many oscillators.
- Risk module included: ATR stop, optional 1R partial take-profit, and a Chandelier trailing stop for the runner.
- Practical filters: higher-timeframe EMA trend alignment, volume surge, minimum BB width, and session window—so it adapts across markets/timeframes.
- Backtest-ready: uses TradingView’s `strategy.` framework with commission/slippage controls.

📈 How it helps traders

✅Regime clarity: distinguishes compression vs. expansion so you’re not forcing trades during dead zones.
✅Objective entries: momentum + band logic reduces discretionary “feel” and late chases.
✅Built-in risk plan: stop/targets/trailing defined in inputs—consistent execution across tickers.
✅Adaptable: works across instruments/timeframes; filters let you tailor noise tolerance per market session.
✅Alerts: real-time signals for entry and squeeze release.
✅Not a Mash-Up / Original Work
✅Fully authored in Pine Script v6; no external libraries or copied logic blocks.
✅Uses well-known, documented formulas (BB, KC, ATR, LinReg slope) combined into a new rule set (two entry modes + momentum + structured exits).
✅Code and parameters are transparent and adjustable; the script stands alone.


🧩 Formulas (core)

Bollinger Bands

# Basis = `SMA(close, bbLen)`
# Upper/Lower = `Basis ± bbMult × stdev(close, bbLen)`
# Width% = `(Upper − Lower) / Basis × 100`

Keltner Channels

# Basis = `EMA(close, kcLen)`
# Upper/Lower = `Basis ± kcMult × ATR(kcATR)`

Squeeze state

# ON: `BB_Upper < KC_Upper` and `BB_Lower > KC_Lower`
# Release: `squeeze_on[1]` and `not squeeze_on`

Momentum (this script)

# `lin = linreg(close, momLen, 0)`
# `mom = SMA( lin − lin[1], momSmoothing )`
# Long bias when `mom > 0`; short bias when `mom < 0`.

⚙️ Inputs

Compression

`bbLen`, `bbMult` — BB length & std-dev multiplier
`kcLen`, `kcATR`, `kcMult` — KC lengths & ATR multiplier
`Entry Mode` — Release + Momentum, Band Break + Momentum, or Either

Momentum

`momLen`, `momSmoothing`

Filters (optional)

`Use HTF Trend Filter` + `HTF Timeframe` + `HTF EMA Length`
`Require Volume Surge` (`volLen`, `volMult`)
`Avoid Ultra-Low Vol` (`Min BB Width %`)
`Session` window

Risk / Exits

`ATR Length`, `ATR Stop Multiplier`
`Take Profit at 1R` (with Partial 50%)
`Chandelier` (`chLen`, `chMult`)
Optional `Time Stop (bars)`

🎯 Entry & Exit Rules

Entry (choose one mode):

1. Release + Momentum (default)

Long: on the bar the squeeze releases and `mom > 0`, passing all enabled filters.
Short: on the bar the squeeze releases and `mom < 0`, passing filters.

2. Band Break + Momentum

Long: `close > BB_Upper` and `mom > 0`, with filters.
Short: `close < BB_Lower` and `mom < 0`, with filters.

Initial Stop

ATR-based: `Stop Distance = atrMult × ATR(atrLen)` from entry.

Targets & Runner

TP1 at 1R (optional): take 50% at `entry + 1R` (long) / `entry − 1R` (short).
Runner: remaining position trails a Chandelier stop:
Long trail = `highest(high, chLen) − chMult × ATR`
Short trail = `lowest(low, chLen) + chMult × ATR`
Optional Time Stop: close the trade after N bars in position.

Labels on chart

“Long” / “Short” = entry signals.
“L-TP1 / S-TP1” = partial exits at 1R.
“L-Runner / S-Runner” = trailing-stop exits of the runner.

Alerts

Provided for Long Entry, Short Entry, and Squeeze Release.

💬 How to use

1. Choose your market/timeframe (e.g., NSE 5–15m intraday, 60m–Daily for swing).
2. If you prefer cleaner trends, enable the HTF EMA filter (e.g., 240m/1D).
3. For intraday, consider Band Break + Momentum with Volume Surge and a small Min BB Width.
4. Adjust ATR/Chandelier multipliers to fit your risk tolerance and instrument.

Abbreviations

BB – Bollinger Bands
KC – Keltner Channels
ATR – Average True Range
SMA / EMA – Simple/Exponential Moving Average
HTF – Higher Timeframe
R – Risk unit (equal to the initial stop distance)

⚠️ Disclaimer

This script is for educational purposes only. Past performance ≠ future returns. Always paper trade first. Options trading carries high risk — manage exposure responsibly.