Understanding the Adam and Eve Pattern: A Double Bottom Trading Strategy

The Adam and Eve pattern is a powerful yet underutilized double bottom formation in technical analysis. This chart pattern emerges through a distinctive two-stage process that traders can use to identify potential trend reversals and plan their entries with precision.

How the Adam and Eve Pattern Forms

The pattern begins with the formation of the first sharp bottom, known as “Adam.” This bottom occurs on notably high trading volume, creating a pronounced V-shaped low point. After this initial decline, price rebounds upward, but the recovery is often incomplete. A second bottom then develops, which is called “Eve.” The critical difference here is that Eve typically forms on decreasing volatility and within a tighter price range compared to Adam’s formation. This two-stage structure is what distinguishes the Adam and Eve pattern from a simple V-shaped recovery.

Key Characteristics That Define the Pattern

Three essential elements make the Adam and Eve pattern reliable for trading decisions. First, Adam’s formation must occur on high volume, signaling strong selling pressure before buyers step in. Second, the price action between Adam and Eve should show hesitation or consolidation, indicating market indecision. Third, Eve should form at a comparable or slightly higher level than Adam, but crucially, with lower volatility. This tightening of the price range is the pattern’s most distinctive feature and signals building momentum for the eventual breakout.

Strategic Entry, Stop Loss, and Price Target Placement

Once the Adam and Eve pattern fully develops, traders can deploy their risk management rules. The stop loss should be positioned below the lowest point of the entire pattern—essentially below Adam’s level. This placement ensures that if the pattern fails to trigger a rally, losses are limited. The price target is determined by measuring the distance from the pattern’s bottom to the previous resistance level that existed before the pattern formed. This resistance zone becomes the initial profit objective, giving traders a clear risk-to-reward ratio for their trade setup.

Understanding and correctly identifying the Adam and Eve pattern empowers traders to spot reversal opportunities with defined risk parameters.