You go southwest from the town where you get the ship. You can just follow the coast southward and then west until you get to a place where you can get off. You should see a new town when you get off there, it's the elf town
You might want to fight a lot in the march lands to the east of that town (fighting ogres), to level up and get money to buy the very expensive silver swords (well worth it for your fighter/s).