The market tells us if we have correctly contained Price within our channels. One need look no further for confirmation on correct fanning than the market itself. Numerous examples exist each day showing how the channel has changed, but the trend did not. This occurs on every fractal, resolution and time frame.
Such is not always the case. We often see tapes, which expand outward long enough, they exist at the size of a traverse (or even a channel) in some instances. These tapes expand so wide that Price never returns to its original right trend line. In such a case, we fan inward - accelerating the channel.
By fanning outward (channel deceleration), we show the intact trend (i.e. one which has not changed direction long or short), but we also contain the altered money velocity (we no longer profit as much per unit time as we once did). In other words, we haven't stopped making money, we just don't make it at the same rate as before.
And 'fanned' channels always do fit into larger containers. Whether or not those larger containers assist the trader to either better 'see' the market, or enable the trader to bank more profits remains a matter of experience.
Choosing to recycle a Point Three into a New Point One, or to 'fan' using the original Point One remains a matter of personal preference. For me, I 'see' the market as 'rolling over' from Point to point, and as a result, recycling Point Three makes better sense to me. However, someone else, who 'sees' things from a slightly different perspective might find 'fanning' from the same Point One provides better clarity.
Again, two different paths which cause two different traders to arrive at the exact same place.
Enjoy the weekend.
- Spydertrader
