The Cadoiço Stream originates in the northeast of Loulé and flows underground through the area before re-emerging as a beautiful waterfall in the centre of the town. From there, it continues southward until it meets the Carcavai Stream. Its path is guided by the Carcavai fault, an impressive geological fracture that runs through the Algarve for over 20 kilometres, from São Brás de Alportel to Quarteira, even extending beneath the sea on the continental shelf. This fault acts like a 'scar' on the Earth's crust, influencing and directing the course of the stream.

After re-emerging at the well-known Fonte do Cadoiço in the heart of Loulé, the stream flows along limestone tuffs—porous rocks formed by deposits of calcite that usually accumulate around springs.