Course 3: How to Spot Low Risk Entries - The Sweet Spot

Identifying the most promising buy or sell entry points is a different process from defining a trend. Knowing that a trend has formed based on 1-2-3-4 or 1-2-3 patterns does not mean that we should enter the market as soon as the trend starts. In fact, in most cases, we want to wait for a pullback in prices before we enter the market. What we want to do is identify what we call the Golden Region of Entry or Sweet Spot.

The following charts show you how to identify low risk entries using the Golden Region of Entry: sweet spot entries in both uptrends and downtrends.

Golden Region

The Golden Region of Entry occurs at an area after point 4 when the price has pulled back between the 10-bar moving average and AbleTrend2. We wait for the price to resume the previous trend direction and we enter the market at that time. When prices reach point 5 we have confirmation of the trend.

We cannot assume where point “5” is. We need the market to tell us when point 5 has formed. We must wait for blue or red bars to show up in real-time informing us that point 5 has formed. Making an assumption that it has formed is only our own opinion. The appearance of blue or red bars after point 5 shows us what the market is telling us about what it is doing. To trade successfully we need follow the market; not try to predict what the market will do.

Why do we need a Sweet Spot?

Why should we do this? The following chart will help you understand. Entering the market on the first breakout is normally very risky.

Entry at the first break-out low point is risky

It is risky to enter trades at the first “breakout” of the low point “2.” On this chart prices rose to point 3, but then dropped before a good profit could be made. Good entries are normally after point 4, near point 5. One should wait for a confirmation of both the start of a trend and the “Maturation of a Trend” before entering into a trade. For the above chart, after point 4, we see higher lows and higher highs, which prevents us from making the mistake of shorting the market (we didn’t get confirmation of the downtrend).

We do not trade a market that is moving sideways, as there are no profits to be made. We only trade when the market is trending. What’s a “Trend”? In simple words, for an uptrend, you must see a succession of price bars with higher highs and higher lows. This trend definition is your foundation. All other indicators are secondary, and they are always delayed due to the additional price bars needed for averaging calculations. This means you never can enter at the key turning points; you must wait for confirmation of the trend formation. AbleTrend2 can guide traders to enter the market at low risk points (near stops and key support and resistance levels). Here is a recent example of a golden region of entry.

The sweet spot

Always ask yourself this question before entering a trade: Is the market now in an uptrend, a downtrend, or is it a choppy market? Only trade the best trending markets. We normally have 3 to 5 days each month where we see such good trending markets.

This is the best system that I have ever used. - Gordon

Here are some more examples of golden region of entry for swinging trading:

The sweet spot

The sweet spot

No one can have winning trades 100% of the time. Sometimes a trade is wrong but we need not worry when we have the second lower row of AbleTrend2 stops to guide us. We will know very soon if the trade is right or wrong by observing whether or not prices break the Trend2 stops. If the stops are broken we can limit our losses by exiting the trade.

Abletrend is supposed to be effective in trending market for a large gain, but it works on choppy sideways market as well, When the market is choppy and in "no trade zone", I watch price action carefully and take profits quickly.. I recommend it to every serious trader who trades for living. The company is also well run by nice people, no annoying sales calls or e-mails. - Terry from brooklyn NY

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Consistency is the key to long-term trading success

While it’s fun to have high volatility during directional days, there are also non-directional days that exhibit high volatility.  That can be a dangerous combination, but we can use the same methodology to catch big winners, as we do to navigate the market to make the best of choppy days. That consistency is key to long-term trading success.  

Buy/Sell Alerts just before the Sweet Spots

Wasting time and energy by waiting in a sideways market isn’t just frustrating; it’s the number one problem that traders face.

Sideways markets and false breakouts can trap traders into losing trades. This unproductive noise drains resources and traders are often too worn out to respond effectively when real opportunities show up.

AbleTrend Sweet Spot Alerts help solve this problem. Let us show you: 1) What a Sweet Spot Trade Setup looks like, and 2) How you can get a customizable Sweet Spot alert. Here is an example:

AbleTrend setup
AbleTrend outcome

Continue on to Part 4

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For your prosperity,

AbleSys Team

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