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"- Can one assume that the louder the engine knocking,
the stronger the degree of retardation?"
Less retardation=more knock. Retarding the timing effectively reduces the compression ratio as the fuel/air mixture is burned before maximum compression is reached.
Check function of knock sensor and also for carbon in the engine (pull the plugs and check them). Verify engine is timed correctly, if you have timed it with your original harmonic balancer in place it may be off by quite a bit, as they tend to slide around when aged.
Shifted
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'87 745t 217,000; '93 Toyota MkII; '73 Suzuki Jimny (Brute) LJ20 360cc
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