Forex Sailing - RULES for Online Forex Trading

Forex Sailing – RULES for Online Forex Trading

Posted April 27th, 2010 by Rapid Forex 27 Comments »

Over the past week, I’ve been reviewing concepts for forex trading online that I call “Forex Sailing.” Today, I’m going to give you the EXACT RULES to follow to start looking for trading opportunities & go Forex Sailing!

For these rules, I’ll be referencing two pictures that I published in previous blog posts (make sure you read them to understand what I’m talking about).

In the post “Online Forex Trading Waves for Forex Sailing,” I introduced the concept of a single Fibonacci wave. Uptrending waves are called “forex candy-canes” and downtrending waves are called “forex umbrella-handles.” Specifically, this picture is important:

The fibonacci wave starts at o% then goes to a peak of 100%, then retraces to 61.8%.

A fibonacci wave with a 61.8% retracement is a common price swing in online forex trading & forms the basis for Forex Sailing.

In the picture above, you’ll notice that there’s a price movement up to a 100% level (from the low to the high of the price swing) and then the price retraces to 61.8% of that high. If the price moved up 100 pips from 0% to 100%, you will want to look for a retracement to a level thats 62 pips above the 0% (low) level.

Different Fibonacci Retracement Levels?

In the picture above I mention a specific 61.8% retracement level. Many people have asked me:

“Aren’t there different possible retracement levels?”

YES!!! There are different Fibonacci levels, but….

The rules below allow you to deal with those levels automatically. Although you’ll be looking at a 61.8% retracement to enter the trade, you’ll be looking at wave patterns to exit. Even if the numbers are different, you’ll still exit the trade properly Simply follow the rules and you’ll see how they adjust themselves to the trading circumstances dynamically.

Fibonacci Wave Zones & Forex Trading Online

In another post called “Fibonacci Wave Zones for Online Forex Trading,” I introduced a picture that you can use to guide your online forex trading decisions:

If you haven’t MEMORIZED this picture yet, you should do so now!

Seriously, MEMORIZE IT NOW!!!

As you can see, there are two forex trading opportunities revealed in the image above. There’s a trade from III-IV, and a trade from V-VI. The rules for trading these waves are very similar, but slightly different, so I’ll cover the RULES separately below.

Rules for Trading the 2nd Forex Fibonacci Wave Online

When you arrive at point III on the picture below, you’re ready to sailing in the forex market.

Step ONE: Looking at the daily charts, determine the direction of the trend:

Once you determine the direction of the daily trend, ONLY look for Forex Sailing opportunities in the SAME direction as the DAILY TREND!

Step TWO: Looking at the 4-hour charts, determine these three prices:

I – the low price of the 1st fibonacci wave

II – the high price of the first fibonacci wave

III – the low price of the retracement of the fibonacci wave (close to current price)

Step THREE – Calculate the Following:

A: Find the DIFFERENCE between II & I – DO SUBTRACTION (II-I). If you get a negative number, just ignore the negative sign (remember the “absolute value” problems from junior high?). We’ll call this number D1 (D for difference).

B: Now we project a price target for IV by adding (or subtracting) D1 to III. For Forex Candy-Canes ADD D1+III to get IV. For Forex Umbrella-Handles SUBTRACT III-D1 to get IV.

Step FOUR – Looking at the 4-hour charts:

Wait for the daily trend retracement (from II-III) on the daily charts to reverse. This means that you’re looking for a reversal signal, then a new fibonacci wave pattern to emerge and get to IV on the 4-hour chart. NOTE: this is the 4-hour chart now, NOT THE DAILY CHART!!! This 4-hour wave is breaking the little retracement wave on the daily charts.
Once you get to a IV,V,VI or VII on the 4-hour charts in the direction of your trade, enter the trade as a MARKET order.
As soon as you enter the trade – Place a STOP order at the price of I (see picture above).
Exit the trade for a profit when you hit your projected price of IV (calculated in STEP THREE above). -OR- exit the trade if a fibonacci wave develops AGAINST YOU (in the opposite direction of your trade) on the 4-hour charts. If a Fibonacci Wave moving in the opposite direction gets to a IV, get out for a profit or a loss – just GET OUT!

Rules for Trading the 3rd Forex Fibonacci Wave Online

The rules for trading the 3rd fibonacci wave (from V-VI) are ALMOST the same. They’re just slightly different…

Here’s the picture again:

Here’s a little fact that I haven’t shared before:

The 2nd wave (from III-IV) is usually the BIGGEST wave in the three wave pattern. The 3rd wave (from V-VI), will be a smaller move. Usually the third wave is the size of the 1st wave (from I-II).

When riding online forex trading opportunities involving the 3rd wave (V-VI), you’ll need this modified set of rules:

STEP ONE – same as above.

STEP TWO – same as above

STEP THREE -

B: Find the DIFFERENCE between IV & V – DO SUBTRACTION (V-IV). If you get a negative number, just ignore the negative sign (remember the “absolute value” problems from junior high?). We’ll call this number D2 (D for difference).

C: Which is smaller, D1 or D2? Pick the smaller number (hint, this is the shorter price movement from the two waves). We’ll call this number D3.

D: Now we project a price target for IV by adding (or subtracting) D3 to V. For Forex Candy-Canes ADD D3+V to get VI. For Forex Umbrella-Handles SUBTRACT V-D3 to get VI.

NOTE: This is really the same process as before, but since we have had two fibonacci waves happen, we’re picking the smaller price movement as our “safer bet” for sailing this forex trading opportunity.

STEP FOUR – same as above.

Follow these Rules for Online Forex Trading

Now we have the rules for Forex Sailing officially written down. I recommend that you print them out and keep them by your side when you go sailing in your online forex trading.

Tons of Examples Coming Next

It’s great to have the rules, but you won’t fully understand Forex Sailing until you see how the rules are applied to forex trading online. I’ll be posting many examples on the blog (and videos that I’ll have for you soon). Once you see plenty of examples, you’ll see how easy online forex trading is with Forex Sailing!

Tags: 4-hour forex charts, daily forex charts, fibonacci waves, forex candy canes, forex sailing, forex umbrella handles, online forex trading Posted in Forex Sailing

27 Responses to “Forex Sailing – RULES for Online Forex Trading”

Ariel P. Says:
April 27th, 2010 at 9:36 am
GREAT MAN !

I was waiting for this topic ! maintain the good work !

You are a great selfless person. God bless you !

[Reply]
JW Says:
April 27th, 2010 at 10:23 am
Hi Brain,

In your 3 wave calculation… D: Now we project a price target for IV by adding (or subtracting) D3 to III. For Forex Candy-Canes ADD D3+III to get IV. For Forex Umbrella-Handles SUBTRACT III-D3 to get IV.

Should be:

D: Now we project a price target for VI by adding (or subtracting) D3 to V. For Forex Candy-Canes ADD D3+V to get VI. For Forex Umbrella-Handles SUBTRACT V-D3 to get VI.

Let us know…

JW

[Reply]
Rapid Forex Reply:
April 27th, 2010 at 10:24 am
@JW – thanks for catching this typo. Copying & pasting is a time saver, but can also create some dumb mistakes I’ve corrected it now (hopefully).

[Reply]
Amador Says:
April 27th, 2010 at 1:15 pm
This early on the information you are sharing with us, I can
now say YOU ARE A BLESSING, Brian.

Amador

[Reply]
dale Says:
April 27th, 2010 at 1:40 pm
B. How’s the weather in Hawaii?( I’m jealous) Please excuse my hesitence but on step one is the low price on the first fibo. wave on eurusd 1.24570? That is the point I am starting at or am I looking in the wrong place? cheers

[Reply]
Rapid Forex Reply:
April 27th, 2010 at 1:59 pm
@Dale – hopefully you’ll be able to Sail the Forex over to Hawaii I can’t answer your question because I warned everyone not to trade the EUR/USD this week in my weekly forex market analysis. In that same analysis, Look at the GBP/CHF (interesting developments there).

[Reply]
Kulvadee Says:
April 27th, 2010 at 2:00 pm
Thanks so much, Brian. This is what I am waiting for and I am looking forward to seeing more examples and videos to get better understanding.:)

[Reply]
dale Says:
April 27th, 2010 at 3:10 pm
B.Just need a starting point looking at gbpchf, is the step 1 at 1.58266? and step 2 at 1.65135? Dale

[Reply]
Regit Says:
April 27th, 2010 at 7:00 pm
@Brian–A little technial correction. In the discussion of the 61.8% retracement, you said, “you will want to look for a retracement to a level thats 62 pips above the 0% (low) level.” That is not correct. If the move went up from 0 to 100 pips, then a retracement means it moves DOWN from 100 by 62 pips, so it stops at 100 – 62 = 38 pips above zero, not at 62 pips above zero.

[Reply]
Rapid Forex Reply:
April 27th, 2010 at 7:01 pm
@Regit – no, I meant that it retraced to the 61.8% (62 pip) level. It doesn’t “retrace 61.8%” it “retraces to 61.8%.”

[Reply]
Forex Trading Indicators EA Software Says:
April 28th, 2010 at 12:44 am
Hi Rapid, the GBP/CHF is down alot lately, are you sure it is still have the up side gain potential, based on Daily or 4H timeframe , what is your target it would be ?

[Reply]
Kevin Says:
April 28th, 2010 at 3:37 am
GOD BLESS

KEV

[Reply]
vykius Says:
April 28th, 2010 at 4:28 am
Hello Brain,
So if I understand right, lets pretend the difference betweem I and II is 100 pips, lets say the price at level II is 1. Retracment level is – 38pips, so the entry price 0,618. Stop loss 0. Projected loss 62pips. projected profit 100 pips. Do I understant right?
v.

[Reply]
Rapid Forex Reply:
April 28th, 2010 at 4:29 am
@Vykius – yes, you understand it correctly

[Reply]
Rob Says:
April 28th, 2010 at 7:25 am
Hi Brian,

Thank you again for sharing your system. (I have commented before but you may not have seen them yet.)Could you please clarify something for me?

Not all retracements reach the 61.8% level and especially in Fib wave 3 which I’ve found to typically retrace to the 50 or 38.2% level. So what do you do if the 61.8% retracement level is not met:

a) Not enter a trade and wait for another opportunity or

b) Enter a trade at a lesser fib retracement level e.g 38.2 or 50% if it converges with a major trend/support/resistance line and there is a supporting candlestick reversal pattern on the 4 hourly (at the same level)?

I have to say I’ve read books and forums on sytems and techniques for trading forex using all sorts of combinations of indicators until my eyes bleed. Of all the knowledge I’ve built up I have to say this is the best commonsense approach I have come across and I have great expectations that this will be the one that will turn me into a profitable fx trader. Keep up the great work, I look foward to sharing some good news with you in the near future.

All the best.

Rob

[Reply]
Rapid Forex Reply:
April 28th, 2010 at 7:26 am
@Rob – I’ll be addressing the answers to your questions in a upcoming blog post. For now, just follow the rules

[Reply]
davina Says:
April 28th, 2010 at 9:03 pm
Hi I’m pretty new to this fibo stuff but in the main first wave example at the top of the page Is that not 61.8 or 62 pips SUBTRACTED from the high and not 62 above the low?
Thanks xxxx

[Reply]
Rapid Forex Reply:
April 28th, 2010 at 9:04 pm
@Davina – no, it’s added to the low.

[Reply]
John MacAulay Says:
April 28th, 2010 at 10:43 pm
All was going well up to this point. Have enjoyed your lessons.
You need to fire your typist. I think this is now correct:

The 2nd wave (from III-IV) is usually the BIGGEST wave in the three wave pattern. The 3rd wave (from V-VI), will be a smaller move. Usually the third wave is the size of the 1st wave (from I-II).

When riding online forex trading opportunities involving the 3rd wave (V-VI), you’ll need this modified set of rules:

STEP ONE – same as above.

STEP TWO -

A: Find the DIFFERENCE between II & I – DO SUBTRACTION (II-I). If you get a negative number, just ignore the negative sign (remember the “absolute value” problems from junior high?). We’ll call this number D1 (D for difference).

B: Find the DIFFERENCE between III & IV – DO SUBTRACTION (IV-III). If you get a negative number, just ignore the negative sign (remember the “absolute value” problems from junior high?). We’ll call this number D2 (D for difference).

C: Which is smaller, D1 or D2? Pick the smaller number (hint, this is the shorter price movement from the two waves). We’ll call this number D3.

D: Now we project a price target for VI by adding (or subtracting) D3 to V. For Forex Candy-Canes ADD D3+V to get VI. For Forex Umbrella-Handles SUBTRACT V-D3 to get VI.

[Reply]
Rapid Forex Reply:
April 28th, 2010 at 8:44 pm
@John – thanks for the correction. I think it’s fixed now

[Reply]
Kyle Says:
April 29th, 2010 at 5:20 am
Hi Brian,
I created a simple Excel spreadsheet to calculate the profit targets and stops for the forex sailing method to help myself as I’m fairly new to this.

All you have to do is enter points I-V on the fibonacci wave (only the cells highlighted in gold) and it automatically calculates D1 and profit target and also D2 for the 3rd wave and profit target using the smaller of D1 or D2. It calculates the stop losses too.

Maybe you can share this with the others if they like it. Maybe you and/or they have a better method already??

The uptrend calculations I just put whole numbers in for points 1-5 just to test the math. But the downtrend calculations I actually put the current figures in for the EUR/USD and the math seems to work.

If your interested, how would I send it to you?

Kyle

[Reply]
Rapid Forex Reply:
April 28th, 2010 at 5:21 am
@Kyle – I was actually about to create an excel spreadsheet myself (they’re pretty easy to do). Thanks for offering, but I prefer to create one for everyone just to make sure all the numbers are right

[Reply]
Kulvadee Says:
April 29th, 2010 at 5:19 pm
I am confused how to calculate, can you give an example by using one of the major pair?

[Reply]
Rapid Forex Reply:
April 29th, 2010 at 7:22 pm
@Kulvadee – I posted this one today, please refer to my latest forex sailing example.

[Reply]
Tim Says:
May 2nd, 2010 at 3:13 am
Hi brian,

This becomes more and more clearer from re-reading each time. Thanks for all you’re doing.

[Reply]
Kulvadee Says:
May 2nd, 2010 at 4:33 pm
Hi Brian

Thanks for the example. From the example on GBPCHF, today is 3 May, on Daily chart the pair seems to start the 3rd wave from point V to VI. On 4hr chart it bounced from support at around 1.6450 to 1.6518 at this moment.
If the upwave trend still exist, I am not sure how to calculate the target on 4 hr chart because it seems to be in consolidation and where we count the high, low and retacement point.

[Reply]
Karl T Says:
May 27th, 2010 at 11:25 am
Hi Brian,

I found Step 4 Item 2 a bit confusing: “2.Once you get to a IV,V,VI or VII on the 4-hour charts in the direction of your trade, enter the trade as a MARKET order.”

In above shouldn’t the sentence only refer to points III and V (as IV is beginning of the 2nd wave’s retracement (not tradeable) and VII is beginning of the 4th wave (which you indicated previously as also not being tradeable))?

[Reply]