When trading, identifying trends and reversal points is essential for making strategic decisions. Two fundamental concepts that traders often use are swing highs and swing lows, while the Adam & Eve pattern can help confirm trends and reversals. Let’s explore these concepts in detail.
1. What is Swing High and Swing Low?
• Swing High: A swing high is a peak point on a price chart where the price reaches a high before it begins to decline again. Swing highs are useful for identifying resistance points and potential selling zones in technical analysis.
• Swing Low: A swing low is a trough, or the lowest point on a chart before prices start rising again. These lows can be used to identify support zones and possible entry points for buyers.
2. Basic Requirements for Identifying Swing Highs and Lows – 3-Candle Combination
Swing highs and lows are often recognized using a three-candlestick pattern:
• Swing High Formation: In this setup, the middle (second) candlestick’s high is higher than the first and third candles. This indicates that the price peaked in the second candle and has started to reverse.
Pattern Requirement: The second candle’s high is above the first and third candles, indicating a swing high.
• Swing Low Formation: For a swing low, the middle (second) candle’s low is lower than both the first and third candles. This indicates a price dip in the second candle, followed by an upward reversal.
Pattern Requirement: The second candle’s low is below the first and third candles, identifying a swing low.
These formations can help traders spot reversal points and gauge the strength of an ongoing trend.
3. What is the Adam & Eve Pattern?
The Adam & Eve pattern is a double-top or double-bottom formation often seen as a reversal pattern in technical analysis.
• Adam & Eve Top:
This pattern is a bearish reversal at the peak of an uptrend. The Adam part usually appears as a sharp, narrow peak, followed by the Eve, which is a broader, more rounded peak. This structure signals that buyers are losing momentum, often leading to a downtrend.
• Adam & Eve Bottom:
The reverse occurs at the bottom of a downtrend, where the Adam bottom is a sharp dip, and the Eve bottom is more rounded. This pattern suggests that the sellers are losing steam, potentially initiating an upward reversal.
IMPORTANT🔔
"In my view, technical and fundamental analysis contribute to less than 10% of making a trading decision. The real edge comes from intuition, experience, and reading the market’s pulse!"
Disclaimer: This content is provided for educational purposes only and does not constitute financial advice,