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66 Part V: Advanced Topics Volume indicators can be very useful in day trading, but they also can be problematic due to the uneven distribution of volume during the day. Typically most of the volume is transacted near the beginning and end of the day.2 Try the volume indicators presented in this book on the charts you trade to see which work best in your environment. AD and II will only work well if your bars are very well specified-that is, if they reflect the underlying trading mechanisms well. Youll stand a better chance with MFI and VWMACD. Pay close attention to the splits between trading sessions, especially if you have set up your charts so one session abuts the next. If gaps occur, be extra careful. The price-formation mechanism continues on, even when the official market is closed. New information is discovered and may be reflected on other exchanges, or in after-hour or preopen sessions, or in price gaps between the prior sessions close and the next days open. This "outside" information can distort averages, bands, and indicators alike. Really with slight variations, just about all of the basic Bollinger Band techniques and uses are applicable to short-term trading. It is just a matter of suiting the approach to your style and choosing the charting period well. KEY POINTS TO REMEMBER Choose your charts carefully. Tighten BB parameters for trading breakouts after Squeezes. Sell reversals outside the bands. Try volume indicators. Be careful about crossing session boundaries.
PART SUMMING UP Part VI wraps things up. First there is a list of 15 basic rules to use when employing Bollinger Bands and then some closing comments. Following Part VI are three important sections: the Endnotes, the Glossary, and the Bibliography. The Endnotes contain related thoughts that just didnt quite fit in the main text, the Glossary defines all our terms, and the Bibliography is a rich source of ideas for further reading. Finally, bound inside the back cover is a reference card with the 15 rules, the M and W patterns, and the key parameters and formulas.
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