Quote from Spydertrader: ... First, lets distinguish between creating 'Steeper' Up channels and creating 'fanned' (Out) channels. We put the 'steeper' channels in place in an effort to make sure we have our channels match our Gaussians and to insure profit protection for the 'Forest Level' traders (the 'steeper' channels bring the Right Trend Line in closer to the Price Action). With 'fanned' (Out) channels, we must fan when Price exits the channel on decreasing Volume in an effort to insure the creation of a 'correct' traverse. In other words, the market has told us we have an incorrect channel and we need to fix the situation to make sure we have the correct context to trade.
The steeper the channel we have, the less likely the channel will remain intact (Price fails to exit the RTL) for any length of time (steep channels do not last very long). Sure, exceptions exist (February 27, 2007 we had a 5 hour down channel), but in general, you'll make the same observation time and time again. The longer a channel remains intact (without a RTL break) the more likely we expect to see the sequence of Point Three, VE / Flaw, FTT materialize. Since 'fanned' (out) channels normally represent a point in time where the market is "rolling over (or under)" so to speak, we do not expect these types of channels to last very long either. Again, exceptions do exist, but in general, you'll see the same observations.
As such, we see the following: Whether or not Price follows the expected sequence of Point Three, VE / Flaw, FTT depends not on the type of channel, but rather, occurs as a function of time. The longer a channel remains intact, the greater the likelihood our anticipated sequence matches reality. The shorter the time involved with a channel remaining intact, the less likely we expect to see the anticipated sequence match reality.
Unfortunately, I cannot yet provide you with an accurate 'time' where one can say, "Well my channel has been around for 20 minutes, so I can expect the anticipated sequences to match reality now." However, just like the 40-60 Volume 'guideline' for anticipating flaws doesn't guarantee one will have a flaw based solely off the single Volume data point, so too, does a anticipated 'short duration channel' not guarantee a failure of anticipated sequence to match reality. One must continually answer the questions, "What do I need to see for continuation? What to I need to see for change?" on every bar. Following this advice provides a mindset for changing what once caused you confusion into what (in the future) will provide confirmation.
- Spydertrader
So I'm thinking more on the lines of looking for signs of dominant move exhaustion inside the channel. This reminded me of a