If you want a bit of background before we get involved in all the technical matters, continue to read. Otherwise, you canjump right to CHAPTER 1 or even CHAPTER 2, without jeopardizing your understanding ofmy approach to trading.

So why this book and why now? Or more broadly put, "Why would you reveal a trading method that really works? Why not just trade it? Aren't you afraid that if too many people use it, it won't work any more?" Reasonable questions that deserve answers. The short answer is that the markets have been kind to me, affording me considerable mobility and a comfortable life style. I was also recently faced with a life-threatening medical condition. Such an event gives one cause to think. Creating this book allows me to give something back. The long answer involves a bit of history.

In 1986 I experienced a severe case of emotional and physical burnout, brought on by over-trading and lack of sleep. I squandered my health and well-being for money and accolades from my peers. I learned then that there were more important aspects to life than the next tick of the S&P. On counsel from my friend, Jake Bernstein, I took a shot at the lecture circuit. It was late in 1986 in Las Vegas at the Futures Symposium International. I was totally unprepared for the response of the attendees.

The lectures were organized in two, one-hour segments, one in the morning and the other in the afternoon. I had been advised by one of the old time pros: "Give 'em an up, down, up, close, and buy. Keep it simple," he had said. "They won't understand or appreciate anything of value." "But that's not the way I trade," was my response. "So what," he muttered. I was surprised at his degree of cynicism. When I asked Jake, the event organizer, what he thought should be covered, his response was direct and simple. "Teach what you think you should. If the attendees don't like it, it's their loss." Well, that's exactly what I did. There were about 35 people in the morning workshop. Their interest was keen, their questions were intelligent and I thoroughly enjoyed sharing my knowledge.

That afternoon I spoke again. This time, the room was filled to capacity. People commandeered chairs from the hallway and other rooms. They were sitting in the aisles, on the floor, some were on top of tables at the back of the room and there were perhaps another 50 people outside the door trying to get in. About 20 minutes into the lecture, an argument broke out between those who wanted a relatively simple question answered and those who wanted me to go on. Time was very limited, and it was all I could do to prevent a brawl.

When the workshop was over, Pat my office manager, and George Damusis my programmer, were mauled for more information. Workshop attendees wanted anything they could get. We had our end-of-day graphics software (the CIS TRADING PACKAGE) which handled the trend and oscillator aspects of the lecture, but we had almost nothing on the style of Fibonacci analysis that I had taught. Fortunately we did have some FibNodc software manuals. These did a good job of teaching Fibonacci, DiNapoli-style, and along with a few beta copies of the software, everything was gone, and I mean gone!

The next several years were loaded with speaking engagements, TV appearances, interviews, offers to manage money, possibilities to start a newsletter, fax services, and so on. While I welcomed the success, thoroughly enjoyed the teaching, and met some outstanding people along the way, it was all becoming a little overwhelming. I was also experiencing a gnawing fear that if what I had developed was overexposed, it could affect the market, my personal trading, and of course the trading of my students. To combat this possibility, I steadfastly refused to publish a book, manage money, publish any type of newsletter, or even to advertise! On three occasions I insisted on halting lectures in which there was unauthorized video taping going on. I even shelved a full video course shot at a two-day presentation sponsored by Coast in 1990, again fearing overexposure of the material. In an effort to maintain a reasonable balance, however, I created the FIBONACCI, MONEY MANAGEMENT AND TREND ANALYSIS in home trading course. I also continued development of the FibNodes software, and enhanced the CIS TRADING (graphics) PACKAGE. In addition, I offered some private seminars, where the number of attendees was strictly limited.

I am going through this background history to make a couple of very important points. Unlike many of my colleagues, I believe the concern of overexposure of a trading methodology - even one that has judgment involved - is a valid and reasonable concern. There's also a philosophical point to be made. Any professional who tries to be all things to all people, and to produce products wherever there is demand, ultimately experiences burnout. That burnout is readily evidenced in his work. I prefer to retain my focus.

Even with limited exposure, I was witnessing an effect in the market from about mid 1987 through 1990 which I believe was directly attributable to my lectures. While this effect was muted, it was nonetheless apparent. Let's be honest, if there's something good out there, it gets around. When it gets around, we need to be watchful. While its usefulness will remain significant, it is always possible that the implementation of the strategies may becomemoredifficult.

From about 1984 to 1987 the Fib analysis, coupled with the all-important context that I will teach in this book, was so incredibly accurate, it was scary. By late 1989, massive orders being set right on Fib retracements and objective points, with stops two or three ticks away, began to wreak havoc with the unqualified Fib players. While I could

compensate my own techniques for what I was observing, the casual Fib player was beginning to get hurt. If a lot of traders get on to something really good, the market will see to it that the majority will still lose. It has to be that way in order for the market to work. 1

Fortunately, in December of 1989, Technical Analysis of Stocks & Commodities magazine published an article by some professor type with a doctorate in pure mathematics. He did a "study" on the validity of Fibonacci movements in the markets. The study "proved" by irrefutable, geometric, logic to any reasonable cerebral type, that the methodology of applying Fibonacci analysis to the markets just didn't work. 2

I found out about this "authoritative" article while speaking at an economics conference in Chicago in 1989. I was with a good friend and client, a professional floor trader, when several attendees excitedly bounded toward us. The first individual was waving a copy of Stocks & Commodities magazine around, all excited about this article, that "thoroughly disproved" the subject matter of my upcoming lecture.

When my client and I figured out what all the excitement was about, we simultaneously gave each other the trader's equivalent of a "high five." It's something like a war dance. The attendee was not a professional and couldn't comprehend our joy. Why would the Fibonacci Guru be happy about an article written in Stock & Commodities magazine, that maintained Fibonacci analysis didn't work? Of course, what we hoped as professionals, and what the newcomer couldn't fathom, was that our job as professional traders was about to become easier - hopefully a lot easier. Thanks to the difficulty the market was presenting the casual Fib player and that magazine article, over the next weeks and months, that's exactly what happened.

So, for me, revealing my trading methodology was a balancing act between the negative effect such exposure might have, and the many, many, benefits that ensue from being recognized as an authority in one's field of expertise. Many of you who are now simply striving for that winning trade cannot imagine the doors that expert status in trading opens for you - not only here in the US, but all over the world!

Starting around 1991, I began to shift my focus to Asia. The markets were ripping over there and I was getting constant input from clients located in Asia and elsewhere around the world that my methods were barbecuing the competition. I've always taught students to go where the profits were easiest and I had always wanted to be in Asia, so... I pulled the plug on all but the best speaking engagements in the US and set out on an exploration

of all the wonders that collectively are Asia. As a professional, speaking in all the major centers, I was able to gain insight into the culture and to gather "competent information" on how the markets functioned in each of the countries I visited. It was a fascinating experience. Back in the US, clients were still finding their way to my door, but the numbers were manageable, and more importantly, the effect on the markets remained muted. Now, at this writing in 1997, things are looking pretty good for additional exposure of the material. There are a number of new Fibonacci experts, some, former students. There has been some good work done. There have also been a few, let's call them "unworkable" books on the subject. Consider this. If an "unworkable" book is written on Fibonacci analysis and people lose money attempting to employ its techniques - that's a good thing. Anything that attracts traders away from the utilization of the concept /// its proper form is an advantage to those who are skilled in how to employ it. There will be less "destructive" activity in price areas important to us.

Everyone has his own idea on how this methodology should be applied. Everyone is doing something different with it. Plainly speaking, this has made it easier for me to trade and has made it possible for me to wrile this book. The simple truth is, the more people who teach a different or impractical use of Fibonacci analysis, the better it is for me - and for yoir. The idea that the whole concept will be denigrated entirely is a virtual impossibility. There are simply too many people making too much money trading it - if they know how to apply it properly.

Aside from Fibonacci work, the marketplace abounds with new techniques and methods. There are eager new traders with eager new experts to teach, and brand new methods to be taught. TradeStation® and other software packages with their blind system-building techniques, put large numbers of orders in lots more places. All this is good news. It leads to the likely conclusion that a reasonable understanding of what is contained herein will pay big dividends. But beware! If this book catches on in a big way, and // it is widely followed (unlikely since there is work involved), over time there may be some consequences. If any methodology is spread too widely spread, the market typically will allow only those who study thoroughly and pay attention to nuances, to fully recognize its true potential and promise. In that respect, this approach is no different from others.