Fibonacci Wave Zones for Online Forex Trading
Now you’re ready to ride the waves of profitable forex trading online. When looking at fibonacci waves, there are certain “zones” that you can trade on. As you’ll see below, only 2 segments of a 6 wave pattern are tradeable for Forex Sailing.
Before I go further, here’s a quick recap of the Forex Sailing lessons that you should have already studied:
1. Timeframes for Trading Forex Sailing
2. Fundamental News for Forex Sailing
Forex Trading in the Zone
Now that you see how fibonacci waves fit together to form forex trading waves, it’s time to look at “where the trade zones are.”
In other words: “where are you looking to ride the wave to do your online forex trading?”
The Beginning of a Forex Trend
The important FACT that I discussed in the multiple fibonacci waves post is worth repeating:
FACT: Forex prices move in 1, 2 or 3 wave patterns
This FACT also means that:
FACT2: ALL wave patterns start with a single wave
This almost sounds stupid. It’s basic common sense. You can’t have a 2 or 3 wave pattern without having ONE WAVE FIRST!!!
Why is this important?
This means that we have to “wait” for a single wave to develop before we can see a new wave pattern!
Let me say this another way: “You can’t trade the first fibonacci wave because you won’t be able to see it until it is fully formed.”
Waiting for the 2nd & 3rd waves to start trading forex
Since you have to wait for the first wave, you’ll only be able to trade the 2nd & 3rd waves. I’ll give rules later about how to mechanically do the trade, but before you follow some rules blindly, here’s what you’ll be doing:
Study the picture above. It GIVES you a winning forex trading system ON A SILVER PLATTER!!!
Here’s what everything in the picture means:
- Each point on a triple fibonacci wave is numbered I through VII
- Points I through III is the 1st fibonacci wave
- Points III through V is the 2nd fibonacci wave
- Points V through VII is the 3rd fibonacci wave
- BLACK lines are NO-TRADE ZONES
- GREEN lines are LONG TRADE ZONES
- RED lines are SHORT TRADE ZONES
- S1 & S2 are SUPPORT LINES, which become RESISTANCE LINES when penetrated
Look at this picture and STUDY IT.
The Forex Sailing rules (coming soon) will show you how to do this. Before worrying about “how” to physically do these types of trades, UNDERSTAND what you’re trying to do.
What to Think During the Forex Sailing Trading Process
Here’s a walkthrough on what you should be thinking at each step of the wave picture above:
I & II - You don’t have an opinion yet. A fibonacci wave hasn’t formed yet. No forex candy-cane. No forex umbrella handle. You’re waiting for more to happen.
III - The first fibonacci wave has completed, now you’re looking for forex trading opportunities. You want to go long if the wave is a forex candy-cane. You want to go short if the wave is a forex umbrella-handle.
IV – You exit the trade for a nice profit.This could be a 2 wave pattern & you’re expecting a retracement going against you to the V level. If the trend ends at this point you have your profits. If the trend continues, you’ll be able ride the third wave for more profits from V to VI.
V – The 2nd fibonacci wave has completed. You get on the third wave and ride it to VI. To do this you’ll follow the rules for entering and exiting the trade (will be given soon).
VI - You exit the trade for a nice profit. The ride is over for you. It’s possible that the trend could continue in your direction for a 4th or 5th wave, but it’s too rare to risk it. You walk away happy with your profits.
VII – You were supposed to walk away from this trade at VI. WHAT ARE YOU STILL DOING HERE? You should be enjoying your profits and done with this trade 
Never regret taking profits. You could have made more, but you also could have done worse. What you actually *did* is most important!
Forex Trading Online = Waiting 2/3 of the Time!
Look back at the picture above (scroll up and look at it)…
Notice that there are SIX lines (7 points, but 6 actual lines).
How many of these lines are used for forex trading opportunities?
Only 2.
4 lines aren’t tradeable.
This means that 4/6, (or 2/3) of the price movements that happen in the forex market are ones that you WON’T TRADE!
When you’re not TRADING, your WAITING to TRADE
If you think that you always need to be trading forex, think again. Waiting for the right opportunity to happen requires some skill and patience. Keep following the rapid forex blog and you’ll be able to zone in on the 1/3 of the time when forex trading can be sweet.
There are a few more blog posts left in the Forex Sailing Series. Some of the topics that are coming are:
- Exact entry/exit rules for Forex Sailing
- Money management rules to grow your forex trading account safely & swiftly
- Tons of COMPLETE TRADE EXAMPLES with numbers, charts, and commentary
- Forex Sailing video webinar showing you EVERYTHING I do LIVE ON-SCREEN to go Forex Sailing
Study Today’s Post
All of the cool Forex Sailing stuff that’s coming your way will guide you to the forex promised land. For today, really take the time to learn today’s post. Print the image. Memorize it. Draw it on a piece of paper. Learn this concept & the numbers will be a breeze. Skip this picture and the rules will be hard to understand.
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April 22nd, 2010 at 2:42 pm
Another WoW, the way you explained was so clear and so in details that even English as a second language speaker like me could understand so easily. Now I am so exited to practice and really looking forward to learning great lessons from you.
From your experience, how long do you think I should practice on demo account before moving to live account (micro or mini) to get the real feeling of trading. I have spent at least 6 hours each day to learn forex since early this year and I found your website from the Market Club daily newsletter that you posted recently this month. Thanks for teaching us.
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Rapid Forex
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April 22nd, 2010 at 2:43 pm
@Kuvladee – Where are you from? I’ve been enjoying our interactions
I recommend you start Forex Sailing with a real account when I start the 90 day forex bootcamp. I don’t believe demo trading is good to do for long. As long as you follow money management principles (coming soon), you can learn while trading real money. I’ll cover a plan for this over the next 3-5 lessons. You’ll be able to start anywhere and know exactly how long it’ll take you to get where you’re going.
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April 22nd, 2010 at 3:13 pm
Brian,
Very informative illustration and well explained. Looking forward to the next topic’s>
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April 22nd, 2010 at 8:17 pm
Great illustration and now I can see clearer the fibo waves theory and shld be applying it to my live trades soon with your teaching.
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Rapid Forex
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April 22nd, 2010 at 8:18 pm
@Patricia – please wait a little longer before you do that. This is the simple (aka “ideal” situation), there are rules to follow about that to do when things happen (or don’t happen). The picture is important to understand how things are “supposed to work.” I’ll be going over real examples of how things “actually work” once the theory has been fully shared. I’m also taking this one step at a time so people actually learn (& even come to some of these conclusions on their own). This way you’ll really get it.
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April 22nd, 2010 at 9:54 pm
Very simple but effective
EURUSD has broke 1,3260 to start a new down trend. Now we are between point I and II, we will wait for point III to start a SHORT SELL. Am I correct ?
The new tartget to end of this year would be somewhere 1,2
The Euro is doomed …..
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April 22nd, 2010 at 10:48 pm
Now I am drawing a Fibo from last high 1,3685 to last low 1,32. According to your Fibonacci Forex Sail, we will set a Stop sell position at 1,3385 -now it is 1,3000-
Rapid Forex, tell me if my analyse is correct, this is what I have observed from your Forex Sailling idea in the past few days
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Rapid Forex
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April 22nd, 2010 at 10:49 pm
@Nicole – No, this isn’t correct. The EUR/USD is in a consolidation right now on the daily charts. Earlier this week it looked like a reversal into an uptrend, but now it’s consolidated. What we need to wait for is for a new fibonacci wave to form AFTER prices exit the range between 1.3280 & 1.3790. Once we have a new fibonacci wave OUTSIDE that range, we’ll have a new trend. This could be a triple bottom that we’re seeing now, but it’s definitely a consolidation channel. I haven’t taught about consolidations in Forex Sailing yet, but I will do so soon.
Please be patient as I complete the Forex Sailing course over the next 7-10 days. Then you’ll have a clear idea about how to deal with everything.
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April 22nd, 2010 at 11:23 pm
Will it always retrace to the 61.8%? If not, then how do you know if it will or wont..are there any clues to look out for?
Sorry if this is a very newbie question.
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Rapid Forex
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April 22nd, 2010 at 11:31 pm
@Abz – This is an excellent question. No, it won’t always obey the 61.8% retracement. There are rules to deal with the cases where it doesn’t hit 61.8%. As you get started just assume that it “should” hit 61.8%. In the next few lessons you’ll have rules about what to do when it hits & when it doesn’t hit this number. We’re taking this one step at a time and will introduce the special cases as we move forward with our learning.
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April 23rd, 2010 at 3:51 am
Just a technical correction. On the UpWave picture, the S1 line is actually a resitance line, so should be R1. It is drawn after confirming that point II is a swing point. Then as the move runs from point III to point IV, it may bounce down from R1 before continuing on up to point IV. AFTER price breaks above R1, R1 then becomes S1 for the move from point IV to point V.
Similar logic applies to labelling S2 that should be R2.
The DownWave has correct labels of S1 and S2 that later turn into R1 and R2.
Also, I’m wondering why you decided to label waves based on the starting point rather than the ending point. I think you are opening the door to confusion for newcomers, because most charts that they will see label a wave at its end point.
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Rapid Forex
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April 23rd, 2010 at 3:52 am
@Regit – I’m keeping it simple. I just called the lines S1 & S2 on both pictures. When I go over numerous examples, the behavior of the lines will be clear. Your idea about labeling the lines on their endpoint is a good idea, it’s one that I’ll adopt for future teachings. Thanks for your input. Please let me know if you see any other oversights or improvements
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April 23rd, 2010 at 5:50 am
Brian,
I´m from Spain. Is the first time I write to you. I think that your a great professional of forex market and better teacher.
Thank you for all you do for us. If some day you will came to Spain I would like to know you.
I´m sorry if my english is not good, but I only wanted to give you thanks.
Thank you very much
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Rapid Forex
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April 23rd, 2010 at 5:55 am
@Alfonso – I will be in Spain in the fall. I would love to meet you. When you notice that I’m in Spain, please leave me a comment so we can meet
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April 23rd, 2010 at 6:02 am
exalent stuff brian it makes lets get going.
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April 23rd, 2010 at 6:51 am
WOW I am impressed. Finally I can see what needs to occur for trading to occur. It is beginning to make sense now.
Thanks for your mentorship it is really appreciated.
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April 23rd, 2010 at 10:24 am
Excellent description of concepts. Graphics are excellent.
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April 23rd, 2010 at 11:58 am
Right, it was a trap ! I though it was another new trend since it break below the triple bottom significantly (distant=60 pips.
By the way, can you modify your comment function that allow readers reply to a specific comment rather then queue up another.
If implemented, this post will be positioned right below the one you replied to me above, but appear in a smaller box to distinguish it with other general comment. You can see this format very popular on other blog.
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Rapid Forex
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April 23rd, 2010 at 11:59 am
@Nicole – I’ve been intending to have the comments function that way. I’ll set it up this week. That is a great suggestion!
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April 23rd, 2010 at 12:05 pm
Great FX Brian, clear, concise and very informative. I am really enjoying the education, as it will help me sort out a lot of misconceptons.
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April 23rd, 2010 at 7:00 pm
Since we are now near the lower boundary and you confirm a consolidation period, why don’t I enter a Long Buy now, target somewhere near 1.3790. How about that ?
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Rapid Forex
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April 23rd, 2010 at 7:01 pm
@Nicole – Trends don’t always continue after a consolidation. Remember this consolidation = confusion. We must wait to see what the trend is AFTER the consolidation is finished.
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April 24th, 2010 at 10:27 pm
I am from Thailand but live and work in Australia.:)
When do you start the 90 day bootcamp?
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April 24th, 2010 at 10:56 pm
Hi Brian
Is it worth to trade when it’s consolidated when the range is quite wide between 1.3280 & 1.3790 or better wait for breakout?
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Rapid Forex
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April 24th, 2010 at 10:57 am
@Kulvadee – wait for the breakout.
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April 25th, 2010 at 3:19 am
THANKS BRAIN,
Beautiful information, will watch the charts for a better understanding.
Kev.
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April 25th, 2010 at 10:01 am
hi Brian..
thankss for sharing your Knowledge regards trading FOREX…but i am just wondering if you can kindly label your charts with the FIBO waves and at what stage the 4 hr charts are at regards these waves on the current charts….also if the Trendline Breaks are shown…so i can follow on my own charts..
thank you
kumar
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April 29th, 2010 at 8:18 pm
Hi Brian, tks for the reply on my query. It will help a lot once you go further into the explanation on the pullback of 61.8% to be a new fib wave or vice versa. Many times, I have encountered when looking at the charts and pull the fib and look at 61.8% as the PB point but it may not be as it can continue all the way up to other fib levels which pave the way for another pattern to form, etc. Well since you said there are exception to the rules and I am truly looking forward to what they are. Looking at EURUSd pair, no doubt it was in an uptrend some time back, but with the recent Eurozone crisis, the Euro just suffered more sell down. In fact when I look at the chart on Weekly t/f, we have tweezer bottom PA formed and technically it should be a sign of reversal for the downtrend which was in place for some months now. Some how due to fundamentals, etc the market stalled its reversal. What’s your out look on this?
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Rapid Forex
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April 29th, 2010 at 8:50 pm
@Patricia – I think the many examples that I’ll be sharing (including the forex sailing videos) will help this to become crystal clear for you. Please hang in there a little bit, soon I think you’ll have the answers you’re seeking
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May 2nd, 2010 at 1:10 am
@Patricia, using the lower chart is an aid to see where the larger chart is. For example, look at the Forex Sailing post again http://rapidforex.com/free-trading-courses/sailing/online-forex-trading-example-forex-sailing-gbpchf/
..(Be aware that I think Brian over simplified what happend in order to present the concept. For example, he doesn’t explain his entry point. Also, he remarks that he began riding the 4H wave on 4/15, but point #3 wasn’t reached until 4/16. You’ll see in the following explanation that there was not an acceptable trade on the 4H chart for me.)
..You’ll see that the daily chart hitting the desired retracement level is really a GUIDE, not a GUARANTEE, to show you to take a look at the 4H chart and look for the same Fib wave to form. At the close on the daily on 4/14, the high on 4/10 ends the up phase (point #2) and the curl down to #3 is starting. So you make that Fib. retracement calculation to get 1.6249 as a guidepost to hit and tell you it is a good idea to start watching the 4H wave develop. As it does, it can do one of three things: get stuck in a sideways channel; go opposite to the direction you expect; go in the direction you expect. If it goes opposite, that just means the daily chart was not yet finished with its wave to #3 and will continue for a while more, probably hitting the next Fib. retracement level. Then you switch back to the 4H chart again and look for the Fib. wave to develop there.
..You can see the daily broke the desired fib value on 4/14. But that does not mean it has reached #3, because you have no confirmation of that. In fact, you see how 4/15 went even lower. The break through 1.6249 on 4/14 was just your signal that there is a high probablility, not a guarantee, that the move has reached pont #3. So you can go ahead and look at the 4H chart begining on 4/15 to see if it is moving up yet. But you must still check the daily chart at the close on 4/15 to see if it continued lower (which it did) to a potential point #3, or if it made a higher bottom. You can’t confirm a new up move on the 4H chart until you confirm the daily chart has reached #3.
..On 4/16, you have a high probablility that the 4/15 low is the #3 point when the high of the 4/15 bar is broken. So if you weren’t already checking hte 4H chart on 4/15, you definitely want to check it on 4/16. You are looking for that up move to end and the curl down to #3 to form.
..You can see the 4H up wave went from 1.6180 to 1.6390. So you can calculate the expected retracement value to the area where point #3 will be found as 1.6310. On my chart, we broke below that value on 4/16. The next bar closed with a higher low, so you can mark the prior low as potential #3 and make your projection for your target. (On Brian’s explantion, he used this low at 1.6310 as #3 and projected TP from there.) Because price did not break above #2 at 1.6392 for an entry (maybe Brian used some other entry method), I would have moved #3 down to the low of 1.6206 on 4/19 and set TP for 1.6418 with entry target of 1.6393, giving potential profit of 26 pips. With such a small potential profit, I would use my #3 point of 1.6206 to look for a stop-loss and set 1.6199 for a risk of 194 pips. This is an unacceptable risk:reward ratio to me, so I reverse calculate an entry level based on risk:reward of 1:1, giving a needed entry at 1.6232. I don’t see any way of getting a logical entry in this area, so I pass up trading the 4H chart. I would then check the 1H chart to see if there is a long trade developing.
..I have additional factors that I consider, so I actually would not have been looking to go long on the 4H chart anyway, because the first failed up move off the first #3 point was EXPECTED to fail because that was really just a retracement phase of an even bigger down move that needed to end before a new uptrend could begin.
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