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
________________________________________ Quote from cnms2: still these channels have to be traverses in a larger container. ________________________________________ 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 Thanks, guys, for the discussion. I've been struggling with the "correct" way to fan channels. I guess the answer is: "whatever works for me". I'll work some more on that.
The problem I have with fanning is not correctly drawing the lines but the correct and prompt detection of BO FBO! Personally I think it can be more challenging than an FTT. FTT is dealing with dominant volume often a surge changing to non dominant. i.e. the change is usually dramatic. The whole BO, FBO, drift out and fan, are at the end of a non dom and so to me its a slightly trickier period being low volume. The changes are more subtle. If we drift out on low volume there are still two possibilities volume picks up in direction of BO or we get a continuation of the old trend (again on increasing volume) and need to fan. Seems sometimes price can start the move on low volume too gradually building up as the next leg unfolds. Cheers.
A little motivation from Jack http://www.elitetrader.com/vb/showthread.php?s=&postid=834454#post834454
and I found to draw a channel from most recent Gaussian point by recycling p3 mimics current sentiment more properly and allows to detect correct FTT in a more updated context. BR
Indeed, However sometimes the BO is confirmed (volume picks up) after the non dom move out. Also seems that on occasion you get false break outs with rising volume. I'll keep an eye out and post a chart or two if I find a tricky one Another area that can present similar challenges is BO's & FBO's from formations and laterals. Cheers.
There are certain characteristics outside of the failure to traverse that set apart FTT's. I find it difficult to put into words the exact behaviour that sets them apart, but I plan on compiling a list of common characteristics and testing their validity over the next few weeks. FTT's mark the end of a price cycle and failing to traverse a channel is but one indicator. I have a strong feeling that it's possible to identify FTT bars as the end of a cycle without drawing channels even. I don't remember the 11:00 bar stand out in particular but I do recognize the mistake. It's happend to me before that I thought I saw an FTT intrabar only to look back at my chart at the end of the day and go "how could I be thinking that?!" The more experienced I become the less it occurs though so my memory must be helping to filter out that type of mistake. One thing I've noticed and that made me hold on the 12:35 bar for example is that FTT's do not tend to move down directly from the open of the bar. Instead price often moves in the dominant direction of the trend only to pause and move back towards the open of the bar where it stalls and bounces back and forth a bit. It's this and other observations that I plan to note down and test their objectivity. It would be interesting to see if I can come up with a list of characteristics that's objective enough to be coded.
Drill: build up the price from its volume bars (click link for full size): <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1690288 width=437>