How do you know if the chicken is squatting?

That is the squatting behavior of which people speak.
Not all will do it so I don't use that as an indicator of imminent lay.
Squatting is a desire to mate and really has nothing to do with imminent ovulation.
When hens run with a rooster they almost never squat because they're already doing it with a boy.
Skittish aloof breeds won't do it either because they won't let a human that close to them.

 

Here's mine doing egg squat. She started squatting about a week out from her first egg.