In addition to signalling periods of low volatility and consolidation, the Delphic Squeeze also incorporates a momentum oscillator to confirm market direction at the time of a breakout. However, as price breaks out from the ranging pattern and begins to fall, the strong directional movement causes the Standard Deviation to increase sharply.Īt the points marked B the Standard Deviation becomes greater than the Average True Range, and the volatility squeeze ends as a breakout movement occurs. Standard Deviation is a much more sensitive and directional measure of volatility.ĭuring the period above the Average True Range (red) remains fairly constant as the amount of movement within each period remains fairly constant (the bars are roughly the same size).Īt the points marked A the directional volatility is also low, and the Standard Deviation (green) becomes less than the Average True Range. Average True Range is an average of the range that includes gaps within its calculation. The indicator compares two different measures of volatility Standard Deviation and Average True Range. The Delphic Squeeze is designed to signal periods of relative low volatility, allowing the trader to prepare to take advantage of the ensuing breakout move. Sideways ranging movements where there is little market interest either from buyers or sellers are typically followed by breakout trends with renewed activity, as new participants enter the market driving it up or down. One of the few true recurring cycles within markets is the transition from periods of low volatility to periods of increased volatility.

Squeeze momentum indicator bloomberg