Book: Kane Trading on: Advanced Fibonacci Trading Concepts
Some discussion about
Advanced Fibonacci Trading Concepts
and the Kane Trading methodology

The following is excerpted from my daily commentary of February 4, 2004:
"Let's move on to the second topic that I want to cover. I was originally planning to do a free article at some point on why I feel that my material is new, innovative, and 'advanced', and completely different than most of the 'cloned' material that is out there. I have so many responsibilities and so little time that I haven't been able to get to that.
As it is, I've had to push Kane Trading on: Trade Management back multiple times. I decided that I would present some of the concepts here in this column. What I want to do is not only explain why I feel my material is different, but explain, in detail, some of the ideas that perhaps aren't as clear to the readers as I thought they were.
It's easy, if the idea is your own, and clear in your own mind, to write something, read it, and think it explains the idea well. The real test is if others can understand it. Kane Trading on: Advanced Fibonacci Trading Concepts was my first book. I wasn't quite 'up to speed' yet with my writing. Things that I think are totally clear may not be clear at all for many readers. I'm getting the impression that many people may have missed the gist of the book.
I think a lot of readers understand the techniques presented in the basic sense, but not many of the overall, holistic concepts. To me, those latter concepts are what I have produced that is unique and valuable. If they haven't been grasped, much of what I am presenting is lost. Let me go back a little in time and start from there.
When my books were first released, I got a lot of e-mails asking how my material was different than this or that author's material. I tried to explain, and did a lot of long back and forth e-mails with people from all around the world. Mostly I had a difficult time convincing people that I had anything special. It really bothered me, because I know what I've developed. I then had a conversation with my 'better half' (much better half).
She said simply: "If they don't see your material as advanced and unique, they simply don't understand it". I spent some time pondering that. It came to me that she was right, and that the fault was my own. I didn't do a good enough job explaining the holistic concepts. I didn't 'spell it out' clear enough. I didn't put enough time on the overall. I explained the techniques, but somehow didn't do enough with the 'gist' of it.
At about this time I started getting e-mails from many of those same people. They started to apply the concepts and started to see the merit in them. Many complimented me in amazingly flattering ways and said how they couldn't believe I could come up with some of this stuff. These weren't beginners; these were highly skilled, originally skeptical veteran traders.
That's when I realized that it took them this long to start to see it. I decided I needed to put out something to clarify the holistic point to my method, to allow traders to have that in their minds when they read the book for the first time, or re-read it. Hence, I will present what I hope is a better explanation here.
My methodology is based on a concept of 'harmonicity' in the markets. I feel that issues move in harmonic ways, and that I can use that in my trading. This concept is not new, and is the basis for great trading sites like Harmonic Trader. I felt that what helped me in my trading was determining whether an issue was harmonic, and if so, how harmonic.
Most authors and traders determine if an issue is harmonic by seeing if it turns at Fibonacci numbers. If an area is formed with three key numbers and the issue reverses in that area, it is harmonic. For me, I needed way more than that. The problem was, I was 'out of numbers'. I couldn't add anything to the area. In my endless experimenting I began to find many 'harmonically derived' numbers.
If these numbers were truly harmonic they should overlap with each other in an issue that is, itself, harmonic. I found that to be the case. Not only that, but I found that they would form very distinct, very close groupings. The layout pretty much always had a distinct look to it, too. This was the start of my methodology. It was the start of something that I have not seen mentioned anywhere else.
I coined the phrase 'layered harmonic support (or resistance)'. I didn't put that term in any of the books, but I should have. It was one of many oversights. This term does not mean the same thing as when some authors put together a loose grouping of three numbers, and another loose grouping with three numbers below that, and say that if the issue goes through the first area it will likely continue to the second area.
I'm talking about one area the size of some other's single area, but the area has three to five very distinct, very tight groupings within that area. This is a layered support area, with each layer being very harmonic. Now, what does it matter, especially if the area turns out to be the same area the next guy formed with just three numbers? If you are asking that, you missed the entire point of Kane Trading on: Advanced Fibonacci Trading Concepts.
As I said, though, that's my fault. That's why I am trying to provide some detail here, to make up for the lack of a spelled out explanation in the book. I don't care, per se, that I have these three to five levels in my area. I care that they exist. What? I am trying to determine how harmonic the issue is, in a much finer way than just seeing if it reversed off of three loosely fit numbers in a broad area.
For me, I need to make decisions on how harmonic I feel the particular issue is. To do this, I need the large array of Fibonacci numbers that I have derived. I need to see if they fall in tight groupings or not. That's how I determine the level of 'harmonicity'. If the lines don't fall together, the issue is not harmonic and I move on.
It's not enough for me to see it reverse a few times near a couple of numbers. I need to look deeper to set the odds more in my favor, in my opinion. As a trader, I have many possible choices on what to trade. I have to select. What I've done is come up with a way to filter out things that I don't want to trade. And the filter is based on Fibonaccis and harmonics.
This is why I go back three, four, five or more years to look for the very small Fibonacci retracements, as in the FDX example. I was asked in an e-mail about one of my examples in Kane Trading on: Trading ABCD Patterns if my reason for showing one or two of these retracements wasn't really just for making the example an even better 'well-chosen' example. The very nature of the question shows that what I am trying to present here is not clear.
The answer to a question like that is absolutely not, not even close. The sole point of adding those retracements in is to see how harmonic the issue is. If none of the numbers I add in fall in my groupings I feel that something is up, and I only have one thing to say: NEXT! I no longer know 'what the issue is thinking' and I look for one that I feel I can 'trust'.
Keep mind that I feel the Fibonacci numbers provide me an edge in my trading because they show the harmonic areas. That's the trading premise. I assume it's the trading premise of all the Fibonacci traders that are reading this column right now. I feel that I have found a substantially better way to judge the level of 'harmonicity' than anything presented anywhere else (just an opinion).
The techniques in Kane Trading on: Advanced Fibonacci Trading Concepts, and to some extent the techniques in all my books and articles for that matter, show how to find the potential trade areas. And they show how to use the many new numbers to build the tight groupings. Perhaps it wasn't clear just why that was important, beyond the fact that they pointed to areas where a trade might want to be put in place.
I have never seen any material from any source discussing the important nature to evaluating the tightness and level of overlap of the groupings using well over twenty Fibonacci derived numbers. If you have found such a source (outside of here), please let me know. It is unlikely such a source exists, since many of these numbers I have derived myself.
Deriving and quantifying the .886, for example, was uniquely my creation. Without the .886, I just couldn't do most of what I do. That's just one of many brand new numbers that I have incorporated, and that I feel are essential, for me to create the layered support or resistance and to judge the 'harmonicity' of the issue.
That's the gist of the methods and I've not heard anything remotely close to this anywhere else. I am still developing new methods and I'm active in several projects right now. I have found a new Fibonacci number in an area where people are using non-Fibonacci numbers because they are close. I knew there was a Fibonacci number there, but I couldn't find it.
I did extensive research and looked at an endless number of cases, and figured out what the retracements actually were. I then found that the data formed a very nice distribution curve, with the mid-point at a certain retracement. I did the same for the reciprocal area, and came up with a number. It turned out the two numbers were exact reciprocals (a coincidence?)
I now had numbers that were helping me in my trading, that I knew were significant, but I didn't know how to derive them. I tried for over three years to derive the numbers and couldn't. Then one day I was looking at some charts and an idea just popped into my head, like a vision on a screen. I quickly picked up my calculator and tried something, something I would never have thought of in a million years (no, wait, I did think of it, subconsciously), and it worked. Lo and behold it gave me the exact numbers right to the hundredth. I still can't believe it.
Now, do you really think anyone on planet earth knows these two numbers besides me? If you want them, you're going to have to wait until I release them, and their derivations, in whatever book or format it is going to be in. Or you can wait and see it in someone's software a year later, or in a whole slew of new books by other authors. My point is I'm deriving this material.
It's my ideas that motivate me to seek these numbers and techniques out. I'm doing it to try to make my trading better. Now, is my presentation of things like these, with my thoughts and concepts and derivations, where you want to be, or do you want to just 'get the number', out of context, without any of the why's behind it, from some clone site or book? I'll let you decide.
As far as the release of these latest numbers, I'm not sure when that will be. I'm working it in with patterns and other things and it's 'in production'. I'll release it when it's ready. I have other things cooking, too. In the meantime, what I have out right now should be more than enough to work with. Don't keep looking for more if there is more than you fully utilize right in front of you.
I hope this explains the holistic point a lot better for everyone. If it doesn't, then perhaps I'll just give up trying to explain all this stuff and get back to having my full focus where I enjoy it most, on my trading."
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