This strategy and the Bollinger squeeze are looking at the same market condition through different instruments. Both wait for compression and trade the release. The difference is what they measure compression with, and that difference changes what the trade can be scaled to.

Running two strategies on one setup is a deliberate choice worth examining, because it is either useful redundancy or the same bet placed twice depending on details.

Measuring Range Rather Than Dispersion

Bollinger bands measure the standard deviation of closing prices — how spread out the closes have been around their average. Average true range measures something different: the typical distance between a session's high and its low, including any gap from the previous close.

Those are not the same quantity. A market that closes at nearly the same price every session while swinging widely inside each one has low dispersion of closes and a high average range. A market that drifts steadily in small steps has the opposite. Compression by one measure is not automatically compression by the other.

The strategy watches for the range measure falling — sessions getting narrower — and waits, taking no position. On expansion it enters in the direction of the release.

The target is where the two approaches genuinely diverge. Because the strategy holds a number describing the pair's typical range, it can scale its target to that number: a multiple of the current average range rather than a level drawn from chart structure. The stop comes from the same quantity. So both sides of the trade are denominated in units of the market's own recent movement rather than in absolute price.

A Coiled Market

The condition is the same as the band version: contraction followed by decisive movement. What differs is which markets qualify. A pair grinding sideways in narrow daily ranges registers as compressed here; one whose closes cluster while its intraday swings stay wide does not.

The strategy needs the expansion to be large relative to the compressed range, which is the scaling assumption doing the work. If a market's typical range doubles on release, a target set at a multiple of the pre-release range is comfortably reachable. If it expands slightly, the target sits inside noise.

It also needs the compression to be genuine rather than a measurement artefact. A quiet holiday stretch produces low ranges that reflect absent participants rather than a coiled market, and there is no expansion coming — just participants returning to normal activity, which registers identically.

Costs Priced in Units of Range

Entry crosses the spread, as with any expansion strategy: the move is underway when the signal fires.

The interesting property is that having a range measure lets the fee floor be expressed in the same units as everything else. If a round-trip costs some fraction of a percent and the pair's compressed range is a known percentage, the ratio between them is calculable before the trade — and if the fee is a large fraction of the typical range, the setup can be declined on arithmetic rather than judgement.

That is a real advantage over a purely structural approach. A strategy reading levels off a chart has no natural way to compare its target to its costs; one holding a volatility number does.

The cost still bites hardest exactly where compression is deepest. The more tightly a market has coiled, the smaller the range the fee is being measured against, so the most visually compelling squeezes are frequently the ones where the arithmetic is worst.

Two Strategies, One Bet

Everything that defeats the band version defeats this one. Compression indicates timing, weakly, and says nothing about direction; the first decisive move supplies direction and is sometimes a probe that reverses. Running a second measure does not fix that, because the ambiguity is in the market rather than in the instrument.

That raises the honest question about the pairing. Two strategies on the same setup only diversify if they disagree sometimes. When both are compressed and both fire, the result is one position at twice the size, taken on one premise — which is concentration presented as diversification.

They do diverge, and the divergence is where the pairing earns its keep. A market with clustered closes and wide intraday swings looks squeezed to the band measure and not to the range measure, and one grinding narrowly with a steady drift looks squeezed to the range measure and less so to the bands. Whether that divergence is frequent enough to matter is a property of the pairs traded, not of the strategies.

The specific failure of the range measure is that it is blind to direction within a session. A session with a wide high-to-low span contributes the same amount whether it closed at its high, its low, or in the middle. Compression by this measure can coexist with a market doing something quite decisive, and the strategy will read it as quiet.

Measuring compression by range rather than dispersion buys one concrete thing: a target and a stop denominated in the market's own units, and a fee floor comparable against them. It buys nothing at all on the question that decides the trade, which is which way the release goes.

Note: This explains how a process works. It is not legal advice, it is not specific to any debt, and it is not a substitute for a licensed attorney in your state. Rules and time limits vary by state and change over time — check the cited sources.