Channels: A Change in Terminology

True confession: My current terminology relating to channels is quite confusing.

I refer to the "Donchian price channel" in discussing the phase a stock is in. This terminology is taken from the Turtle trading method.

I talk about "trend price channel" is discussing the trend a stock is in. This is classic chart analysis. I learned of it years ago in reading Robert Prechter, the premier Elliott Wave analyst.

A Donchian price channel is composed of horizontal lines marking the highest high and the lowest low over the past however-many days. The Turtle traders use a 55-day periodl. I use a 20-day period.

A price trend channel slopes in the direction of a trend. For a downtrend, the upper boundary is set first, connecting the highs, and then the lower boundary is a parallel line set at the first lowest low of the downtrend. For an uptrend, the lower boundary is set first.

So, essentially, I'm now using the same phrase -- "price channel" -- for two different beasts.

Going forward, for the Donchian construct I'll use the term "price level" or "Donchian price level". In practice, it will probably come out in my reports as "SPY pushed below the 20-day low price" or "below the lowest price of the past 20 trading days" or some such thing. The word "level" will mainly be implied but unwritten.

This puts me at variance with the Turtle traders, but so it goes. I mean, they're Turtles, for heaven's sake!

My trend price channel usage will remain unchanged: "downtrend price channel" or "the channel set by the downtrend that began last week" or some such.

I think this will increase the precision of my terminology, eliminating a lot of confusion. And since imprecision and confusion are both enemies of profit, eliminating them is all to the good.