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64   Figure 21.4 RSI with Bollinger Bands, Dupont, 150 days. Note how well the bands work as definitions of overbought and oversold.
Chapter 21: Normalizing Indicators 175 5/00 6/00 7/00 6/00 9/00 10/00 11/00 12/00 1/01 2/01 Figure 21.5 %b(RSI), Dupont, 150 days. A much-improved view of indicator action. are formed by taking continuous sums of the daily readings, or oscillators that swing back and forth within a predetermined range or above and below a centerline. In either case, the new definitions of high and low afforded by this method allow the user to integrate the information from the indicator into a rigorous trading process in an adaptive manner unobtainable before. KEY POINTS TO REMEMBER Use Bollinger Bands to normalize indicator levels. Generally, longer average lengths are needed. Try replotting the indicator as %b.
CHAPTER  DAY TRADING Bollinger Bands are widely used in the daytrading community. They are used on everything from tick charts on up, and they are used in many different ways. Indicators, when used with the bands, tend to be trend or momentum indicators. Volume indicators are an interesting alternative, though day traders rarely use them. The most critical part of day trading is chart selection. The finest gradation is the tick chart. Most traders will want to keep a tick chart going for their short-term reference. This chart should have the bid and ask plotted along with the ticks for the last sale- although plotting the bid and ask may cause the chart to become too cluttered for really active stocks. Connecting the ticks is a nicety that can get you into trouble, as it encourages a belief in greater continuity than may actually be exhibited by the price structure. A time frame of a day or two is usually fine, but you
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