You use both, Kathleen. So if his nadir is 40, you reduce the dose a little as the dose is taking him too low. If his preshot is in the 200s and his nadir is 100, then you have some room to add a little insulin. (which seems to be where he is, unless he is dropping lower earlier in the cycle, which I think is what Rachel is wondering about)
It does depend on your goal. He is pretty regulated at this point, which is great. If you want to push a little and get him into blue preshots and green nadirs and hope he might go off insulin, then you'd give a little more insulin. You'd pick a lower preshot number - say shooting at 170-180 - and watch the nadirs to see that they are in a safe range. You'd up the dose a smidge for those preshots around 200 and again watch the nadirs.
Maybe it would help to look at the remission thread at the top of this page and check out some of those spreadsheets. As their cats were headed off insulin, they got a little more agressive, shooting at a lower preshot. If that's your goal, that's what you'd try.