Most of the time, you will probably be working with colours selected from the manufacturers ranges and thus all colours will alread be matched to the available threads.
It is however possible to select any of the possible 16.8 million colours even though they are not available as thread colours. This can be done automatically when scanning or importing images in order to allow more control over the colour selection process.
This command will cause each of the used colours to be swapped for the nearest available colour in the current manufacturers range.
By using the "No Dupes" option, if more than one colour matches to the same thread, they will be merged so that that colour only appears once on the key. This will prevent future distinction between the two colours.
Without the "No Dupes" option, the colours will look the same but will appear as two entries on the key and have different symbols. This can be used if you intend to retain the distinction between the two colours by manually selecting a colour blend.
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