A volatility squeeze strategy

The rule

Bollinger Bands widen and narrow with volatility; the Keltner channel moves more slowly. When the bands sit inside the channel, the market is unusually quiet — the TTM squeeze. The bet: quiet ends in a move.

• Enter when the close crosses above the upper band and the squeeze was on within the last 5 candles, with half of the free capital. The breaking candle itself usually widens the bands and ends the squeeze, so it is enough that the squeeze was on recently.
• Exit when the close crosses below the middle band, or at a −6% loss.

Three steps

1. Open it. Press Open in the wizard on the card and check the answers: coin, direction and market, candles, how tight a squeeze, how much risk.
2. Try it. Press Fine-tune in the editor, then Test on history. Nothing is saved. Open the line under that button and tick Compare against random entries to see whether the squeeze beats a coin flip with the same exits.
3. Keep it. Save the strategy and press Run backtest on its page for the full report.

What it did on Bitcoin

Dry runs on BTC from 2020-01-01 to 2026-11-01. Holding BTC over the same period made about +980%.

Mild squeeze (Keltner 1.5), 4-hour candles

Trades182

Returnabout +58%

Max drawdownabout 16%

Tight (1.25), 4-hour candles

Trades103

Returnabout +20%

Max drawdownabout 15%

Very tight (1), 4-hour candles

Trades44

Returnabout +15%

Max drawdownabout 12%

Tight, daily candles

Trades16

Returnabout +58%

Max drawdownabout 17%

Tight, 4-hour candles, with the trend filter

Trades67

Returnabout +24%

Max drawdownabout 9%

Tight, 4-hour candles, the short mirror on futures

Trades113

Returnabout −16%

Max drawdownabout 21%

Fewer than four trades in ten won; a few large moves paid for the rest, as with most breakouts. A tighter squeeze meant fewer trades and not better ones. Sixteen trades on daily candles say very little, however good the number looks. And the short side lost in a period when BTC rose tenfold, so it tells you more about the period than about the rule.

What to try next

• A filter. In the wizard, with the bigger trend almost halved the drawdown here. The trend-filter recipe explains it.
• Volume. A quiet market that breaks on heavy volume is another reading of the same idea: a breakout on volume.
• A trailing stop. In the editor, open Quick add in the exit section and pick Trailing stop by ATR, so a large move does not have to fall back to the middle band before you are out.

Frequently asked questions