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Squeeze Strategy – Key Rules

Monday, 4 December 2017 00:00
Squeeze Strategy – Key Rules

In the view of many traders, the Squeeze Forex Strategy is rather dangerous technique. Alongside, the system is very profitable, and, therefore, it deserves particular attention.

The technique includes a transparent scheme of actions, which is supported by verified indicators. The robots give accurate signals to enter the market and close the positions, which increases the chances of getting higher profit.

The Indicators Supporting Squeeze Strategy

A trading strategy is a well-managed mechanism of entering the market and closing the positions. At the same time, the technique determines Stop Loss and Take Profit levels, the calculation of the risks for each transaction, trade rules, etc.

Without indicators, it is impossible to identify the points best suited for opening orders, that's why below we'll describe, which trading robots to use in Squeeze Strategy. 

To implement this system, you should add the following technical instruments to the chart:

  • Awesome Oscillator (АО) — a classic Bill Williams' oscillator that should be used with basic configurations;
  • Accelerator Oscillator (АС) — another oscillator, which is a verified indicator and should be used with basic settings;
  • Stochastic —an oscillator that should be configured to the parameters of 5,3,4 and put on the AC chart.

Description of Squeeze Strategy

Н4 is an optimal timeframe for trading according to Squeeze Strategy. It is possible to configure smaller periods; however, in that case, a trend is less easily identified. You can choose any currency pair.

Regarding trading signals, significant aspects are:

  1. Awesome Oscillator determines current market conditions, which will help identify a trend. Please note that AO reacts rather slowly to a trend reversal, but still, gives accurate indicators. If the AO and AC indicators are of the same color; it means that the strongest tendency is recorded.
  2. Accelerator Oscillator is a key tool of technical analysis that confirms the need to open/close orders, according to Squeeze Strategy. It is considered that the AC oscillator is one of the few Forex robots, by the signal of which you can open profitable trade positions very close to the reverse moments of the trend (highs and lows).
  3. Stochastic shows oversold and overbought areas of a traded currency pair in the market.

Market Entry: An Aggressive Approach

According to Squeeze Strategy, you can open a position if one of the following conditions is met:

  1. While waiting for a moment to enter the market, special attention should be given to the levels of 80 and 20. When the Stochastic lines %K and %D cross one of the levels, a trader may open the corresponding position. Besides, the AC and AO indicators must be of the same color.
  2. Also, pay attention to the overbought and oversold levels. When Stochastic crosses one of them, and AC is red or green color, a trader can place an order at the same level.

Market Entry: A Conservative Approach

In this case, Squeeze Strategy needs Stochastic to cross the levels of 80 or 20. After that, you should continue monitoring the indicator and open an order when it crosses the AC oscillator's zero axis.

Do not open a position, if Stochastic line crossed an overbought/oversold area, and AC didn’t change the color on the next bar.

Here is an example of performing transactions for each option:


It is important to understand that the strongest signal for entering the market according to Squeeze Strategy is when the bars of AC oscillator cross the level of 80/20, at the same time crossing the lines of Stochastic indicator.

Observing and Closing Positions

  1. You should start trading three lots at once and place a Stop Loss at the level of 50 pips. If you are not ready to open three lots at once, you can reduce it to 0.3 lots or even 0.03 lots;
  2. 50 pips after opening a position, you should close the trade on the first lot. Also, a Stop Loss should be moved to the level of profitability;
  3. In another 50 pips a trade is closed on the second lot;
  4. You should close the third lot after receiving the opposite signal to a market entry.

Please note that it's better to close a position if Stochastic does not break the level of 80/20. You need to exit the market after Stochastic crossed the zero axis of AC indicator.

Recommendations on Squeeze Strategy

If you have just started to test Squeeze Strategy, do not risk with timeframes and set up the chart for an H4 period. You will get more information about price movements, understand the overbought/oversold levels, which is hard to see on the minute charts. 

It is necessary to open and close positions only by the verified signals, using Accelerator Oscillator. Also, pay attention to the version of technical instruments; it is better to use a program with the latest updates.

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David Melton
David Melton

Financial expert. I work with investors and different companies. I write analytical reviews for newspapers and TV channels and I also manage researching projects