Falling Wedge Pattern: Meaning, How it Works, Trading, and Example

A falling wedge pattern is a bullish chart formation defined by two downward-sloping, converging trendlines. Falling wedge patterns are confirmed when the price breaks above the upper trendline with increased trading volume. The expected price movement is measured from the widest part of the falling wedge chart formation and projected upward from the breakout point.

A falling wedge pattern is characterized by two converging trend lines that slope downwards. The upper trendline indicates the resistance level formed by successive lower highs. The lower trendline, which is steeper, represents the support level defined by lower lows. Selling pressure decreases as the price moves within the narrowing range of the support and resistance levels of the falling wedge pattern.

A falling wedge chart formation is validated when the breakout occurs above the support level, accompanied by increased trading volume. The anticipated price movement is calculated by measuring the widest point of the falling wedge pattern and projecting the distance upward from the breakout point.

For example, in a currency pair like EUR/USD, the euro (base currency) depreciates relative to the dollar (quote currency) during the wedge formation. The declining rate of depreciation indicates weakening selling pressure in the euro, which signals that buyers may soon take back control. The reduction in the euro’s downward momentum against the dollar suggests a possible trend reversal as the falling wedge narrows. The upward breakout implies that demand for the euro has strengthened relative to the dollar, and that the uptrend continues.

The falling wedge pattern is important in trading because it provides traders with favorable risk-reward ratios while offering clear entry, exit, and stop-loss levels that minimize potential losses. The falling wedge pattern enables traders to identify potential bullish reversals or trend continuations while selling pressure diminishes and buying interest begins to emerge in the market.

The falling wedge pattern delivers considerable value to traders through its ability to offer precise entry points after price breaks above the upper resistance line. Traders set a profit target by measuring the height of the widest part of the falling wedge formation and adding it to the breakout point to create measurable profit objectives that professional traders such as swing traders, day traders, and position traders incorporate into their position sizing calculations.

Risk management becomes more effective when traders utilize falling wedge patterns because the converging trend lines create relatively smaller distances between entry points and stop-loss levels. Because wedge patterns converge to a smaller price channel, the distance between the price on entry of the trade and the price for a stop loss is smaller than the start of the pattern, which means traders place protective stops closer to their entry prices while maintaining appropriate risk parameters.

The falling wedge pattern appears across multiple asset classes including stocks like Apple and Microsoft, foreign exchange pairs such as EUR/USD and GBP/JPY, commodities including gold and crude oil, and cryptocurrency markets featuring Bitcoin and Ethereum. The falling wedge pattern occurs very often in financial markets, such as stock markets, commodities, forex and cryptocurrencies, giving traders numerous opportunities to apply this analytical tool across diverse trading portfolios.

Volume confirmation serves as a critical component that enhances the falling wedge chart pattern’s reliability for trading decisions. Volume confirmation is important when understanding what is trading, as it highlights how market participants rely on signals like volume to validate price movements and reduce risk. Volume is an essential ingredient in confirming a Falling Wedge breakout because it demonstrates market conviction behind the price movement and provides traders with confirmation before committing capital to positions when volume increases during the breakout phase.

The falling wedge chart pattern is not suitable for all trading approaches. The falling wedge bullish reversal formation works best for technical trading, swing trading, and position trading strategies where extended timeframes allow proper pattern development and breakout confirmation.

Technical trading benefits from falling wedge patterns because price action converges within clearly defined trendlines that provide precise entry and exit points. The falling wedge pattern’s geometric structure offers measurable risk-reward ratios that technical analysts quantify before entering positions.

Swing traders find value in falling wedge formations since the pattern’s duration typically spans several weeks, which aligns perfectly with their medium-term holding periods. The falling wedge’s completion signals momentum shifts that swing traders capture effectively.

Position traders leverage falling wedge patterns successfully because the pattern’s completion often signals extended bullish trends that persist for months. The falling wedge formation’s reliability increases when it appears on higher timeframes where institutional participation validates the breakout.

The falling wedge pattern demonstrates poor performance within scalping trading environments where rapid execution requirements conflict with the wedge’s gradual development process. Day trading strategies face limitations because the falling wedge pattern requires extended formation periods, while fundamental trading approaches focus on underlying valuations rather than technical price behavior, which distinguishes it from other types of trading that prioritize short-term chart patterns.

An example of Falling Wedge pattern is shown below.

The falling wedge pattern is a bullish continuation pattern that forms during a downward trend, where price movement narrows between two downward-sloping trendlines. The descending wedge pattern rules require at least two lower lows and a steeper resistance line. A descending wedge breakout above the resistance level must be accompanied by increased buying volume to validate the signal.

A falling wedge pattern develops as lower highs and lower lows form along two descending trendlines. The upper trendline connects the lower highs, while the lower trendline connects the lower lows of the falling wedge chart formation. The trendline convergence signifies a continuous decline in downward momentum.

A falling wedge chart formation resolves when the price breaks above the resistance line. The breakout indicates that buyers have regained control of the market as the increased demand pushes the prices upwards. A surge in buying volume confirms that the bullish trend reversal predicted by the falling wedge pattern is imminent.

The rules of the falling wedge pattern require the formation of at least two lower highs along the upper trendline and two lower lows on the lower trendline. The upper trendline serves as the resistance level, while the lower trendline acts as support. The resistance line should slope down at a steeper angle than the support line to indicate weakening downward momentum. Trading volume must decrease as the descending wedge pattern develops.

A falling wedge formation is validated by an increase in buying volume after the price breakout. Increased buying volume strengthens the bullish reversal signal by confirming the increase in market demand. Traders rely on the validated descending wedge breakout to estimate the target price and determine optimal entry or exit points.

The characteristics of falling wedge patterns are listed below.

1. Multiple Trendline Touches: Falling wedge patterns are characterized by several touches of both the upper and lower trendlines. The trendline formation of lower highs and lower lows defines the authenticity of a falling wedge chart formation.
2. Convergence in Price Range: A falling wedge pattern features a narrowing effect as the price movement compresses between the trendlines. The tightening price action signals a potential bullish reversal upon breakout.
3. Declining Selling Volume: The falling wedge chart formation is characterized by a gradual decrease in selling volume as it prepares for a price breakout. The contraction indicates a decline in market supply, which strengthens the likelihood of a trend reversal.
4. Breakout Above Resistance: The falling wedge pattern confirms a bullish reversal when the price breaks above the upper trendline.
5. Increased Buying Volume: A falling wedge chart pattern is validated by a surge in buying volume after the price breakout. The bullish volume expansion reinforces the likelihood of a sustained price increase.

The falling wedge pattern signals a bullish reversal or the continuation of an uptrend. The falling wedge chart formation reflects seller exhaustion as price movements narrow between downward-sloping, converging trendlines. A breakout above the upper trendline, confirmed by increased trading volume, signals an ideal entry point for long trade positions in anticipation of further price gains.

The falling wedge pattern shows market consolidation during a downtrend. The price movement narrows as lower lows and lower highs converge in the falling wedge chart formation. The narrowing price action indicates that sellers are losing control of the market. Reduced seller momentum creates an opportunity for buyers to regain their market dominance and push the prices higher as the breakout phase of the falling wedge pattern approaches.

A falling wedge pattern indicates a potential bullish trend reversal after the price breakout. The uptrend reversal signal is validated by a price breakout above the resistance level, accompanied by increased trading volume. Traders view the price breakout as an entry signal to enter long trade positions and capitalize on the anticipated price increase.

The falling wedge pattern signals a possible continuation of the existing market uptrend. A temporary price equilibrium arises in a bullish market trend during the formation of falling wedge. The breakout above the upper trendline triggers increased buyer momentum, and confirms the possibility of a bullish continuation in the market.

No, the falling wedge pattern is considered a bullish chart pattern. A falling wedge pattern suggests a potential reversal in price direction from bearish to bullish. The bullish nature of a falling wedge pattern makes it a valuable technical analysis tool for traders seeking to capitalize on potential price increases after the breakout.

The steps to trade the falling wedge chart pattern are listed below.

1. Identify the Pattern. Look for a falling wedge chart pattern forming on the trading chart. The falling wedge formation consists of converging trend lines that slope downward. Price action makes lower highs and lower lows, to indicate weakening bearish momentum.
2. Confirm the Pattern. Wait for confirmation before taking action once the falling wedge pattern is identified. Confirmation involves ensuring the price touches each trendline at least twice.
3. Monitor Volume. Observe the trading volume as the falling wedge pattern develops. A decline in trade volume during the descending wedge chart formation signals reduced selling pressure. A trade volume surge at the breakout phase validates the bullish reversal signal.
4. Set Entry Points. Plan the entry point outside the falling wedge chart formation. When the price breaks above the upper trendline, consider entering a long trade position. The breakout confirms the shift in market sentiment from bearish to bullish.
5. Determine Stop-Loss and Take-Profit Levels. Set a stop-loss order below the most recent low outside the lower trendline to manage risk effectively. Measure the wedge’s height at its widest point and project that distance upward from the breakout point for take-profit levels.
6. Practice Risk Management Techniques. Employ risk management techniques to protect against market volatility. Use appropriate position sizing and maintain disciplined trade exit strategies to maximize gains and minimize losses.

The falling wedge chart pattern works optimally with breakout trading strategies, reversal trading strategies, momentum trading strategies, and pullback trading strategies. The approaches capitalize on the falling wedge pattern’s inherent bullish characteristics that emerge when selling pressure diminishes within the converging trendlines. The suitable strategies leverage the high probability upward price movement that typically follows falling wedge pattern completion.

Breakout trading strategy represents the primary approach for falling wedge patterns because traders position themselves to capture the explosive price movement that occurs when price breaks above the upper trendline resistance. Execution requires precise entry timing at the moment of breakout confirmation, which technical analysts define as a close above the resistance level with increased volume. Risk management involves placing stop losses below the lower trendline, while profit targets extend to measured moves that equal the falling wedge pattern’s maximum height projected upward from the breakout point.

Reversal trading strategy complements the falling wedge pattern since this formation appears near the end of downtrends in major currency pairs like EUR/USD, GBP/USD, and USD/JPY. Traders utilizing the reversal approach recognize that the falling wedge pattern signals trend exhaustion rather than continuation. Entry signals emerge when price action demonstrates clear rejection of lower levels within the falling wedge formation, particularly when supported by bullish divergence indicators such as RSI, MACD, or stochastic oscillators.

Momentum trading strategy becomes effective following the initial breakout because falling wedges often produce sustained upward price movements that create trending conditions. Traders employing the momentum strategy enter positions after breakout confirmation and ride the momentum wave while monitoring volume indicators and moving averages like the 20-period, 50-period, and 200-period EMAs to gauge trend strength.

Pullback trading strategy offers lower-risk entry opportunities for traders who miss the initial breakout surge. The pullback approach involves waiting for price to retrace toward the broken resistance level, which often transforms into support through the principle of role reversal. Entry occurs when price demonstrates respect for the new support level and provides favorable risk-to-reward ratios while maintaining the pattern’s bullish bias, which is a common feature among popular trading strategies.

The falling wedge pattern is used in trading when traders want to identify potential market reversals and seize bullish trading opportunities.

Forex, stock, cryptocurrency and commodity traders use the falling wedge pattern to recognize when a bearish correction is losing its market momentum and the underlying upward trend is about to restart. Traders monitor the falling wedge formation to pinpoint the convergence of the upper and lower trendlines. The trendline convergence indicates that, although prices are declining, the force behind the downtrend correction is weakening. A price breakout above the resistance line signals a change in market sentiment.

Forex, stock, cryptocurrency and commodity traders use the falling wedge pattern to profit from the expected price increase when the breakout is validated. The bullish reversal signal is validated when the upward price breakout is accompanied by increased buying volume. Forex, stock, cryptocurrency and commodity traders enter long trade positions or close short trade positions to capitalize on the expected bullish trend.

The falling wedge pattern is used for buying. The falling wedge chart formation indicates a potential bullish trend reversal or continuation once the price breaks above the upper trendline. Buyers place long trade positions when the price breakout is validated by a surge in trading volume.

The success rate of the falling wedge pattern is approximately 68% in signaling bullish trend reversals after a downtrend. The success rate of the falling wedge formation is influenced by market context, trend validation, and trade volume analysis.

The falling wedge pattern has a 68% success rate of upward breakout, according to Thomas Bulkowski in “Encyclopedia of Chart Patterns.” A high success rate of the falling wedge pattern shows the potential effectiveness when accurately identified.

The success rate of the Falling Wedge pattern depends on the overall market trend. Falling Wedges form during established uptrends, and their reliability increases when traders confirm the presence of an upward movement. A clearly defined downtrend raises the likelihood of a successful bullish breakout when the falling wedge pattern resolves.

The success rate of the falling wedge chart formation relies on the presence of multiple price reversals within the formation. A valid falling wedge pattern should exhibit at least two lower highs and two lower lows, gradually converging to create the wedge shape. The clarity and symmetry of the reversals enhance the success rate of the falling wedge chart formation in predicting upward price movements.

The success rate of the falling wedge pattern largely depends on trading volume behavior throughout its formation. A decline in volume before the breakout reinforces the likelihood of an upward trend reversal, while a significant volume increase at the breakout confirms the bullish signal.

The failure rate of a falling wedge pattern, like any technical pattern, varies depending on market conditions, trade volume analysis, and pattern recognition. The falling wedge pattern fails 25-35% of the time, but misidentification of the trendlines, reliance on low confirmation signals, or whipsaws in highly volatile environments increases the failure rate.

The falling wedge pattern has a break even failure rate of around 26% for upward breakouts, according to Thomas Bulkowski in “Encyclopedia of Chart Patterns.”

Unstable or unpredictable market conditions lead to higher failure rates of falling wedge patterns due to fluctuating price movements that deviate from the expected breakout direction.

Incorrectly drawing the trendlines of a falling wedge pattern results in false breakouts that mislead traders into entering trade positions that do not align with actual market behavior.

The failure rate of a falling wedge pattern rises when traders rely on low confirmation signals. Strong confirmation, such as increased trading volume during a breakout, is essential for validating the pattern. Weak signals mislead traders into taking positions based on insufficient evidence, heightening the risk of loss.

Volatile environments increase the failure rate of falling wedge patterns due to whipsaws. Whipsaws occur when a price briefly moves past a trendline only to reverse direction quickly. The sudden price movement triggers premature entries or exits, which results in losses for traders who are not prepared for such fluctuations.

The falling wedge pattern effectively predicts bullish reversals when the price decisively breaks above the upper trendline, supported by a surge in trade volume. The accurate identification of trendline convergence and volume behavior increase the effectiveness of the falling wedge pattern in technical analysis.

The effectiveness of the falling wedge pattern in technical analysis is given around 68% of the time. The falling wedge pattern successfully meets the price target around 62% of the time, when it is confirmed, according to Thomas Bulkowski in “Encyclopedia of Chart Patterns.”

The falling wedge pattern demonstrates its effectiveness through the structure of its converging trendlines. The upper trendline descends at a shallower angle compared to the lower trendline. The falling wedge chart pattern becomes highly effective when the price decisively breaks above the upper resistance line, making it a valuable tool within technical analysis for identifying potential bullish reversals.

The falling wedge pattern in technical analysis is effective when validated by trading volume behavior. A trade volume surge after the breakout phase indicates heightened buyer interest and reinforces the bullish reversal signal.

The falling wedge pattern in Forex trading typically manifests as a bullish reversal or continuation signal, with distinct characteristics shaped by market liquidity, macroeconomic catalysts, and currency pair volatility. Unlike other markets, Forex’s 24-hour trading cycle and high leverage amplify the speed and reliability of breakouts, though false signals may arise during low-liquidity sessions.

In Forex, the falling wedge often forms during corrective phases within broader trends, with converging trendlines reflecting temporary bearish exhaustion. The pattern’s validity hinges on macroeconomic sentiment shifts, such as central bank policy changes or geopolitical events, which accelerate breakout momentum. A descending wedge in major currency pairs might develop during short-term market corrections driven by rate expectations or trade imbalances. Traders in the Forex market rely on volume surges and breakout confirmations during high-liquidity trading sessions, such as the London or New York open, to reduce the risk of false signals—an essential consideration when analyzing the meaning of Forex trading in these dynamic conditions.

In stock trading, the falling wedge pattern evolves more gradually, often aligning with earnings cycles, sector rotations, or institutional accumulation. Its reliability increases when corroborated by fundamental catalysts like product launches or improved margins, as equities are less prone to intraday noise compared to Forex or crypto.

Stocks exhibit a tighter correlation between pattern completion and volume confirmation. Large-cap stocks tend to display clearer falling wedge formations due to structured institutional positioning, whereas small-cap stocks may show distorted patterns due to retail-driven volatility. Unlike Forex, false breakouts are less frequent in regulated equity markets because of transparency in corporate disclosures and analyst coverage. A retest of the breakout level within a few trading sessions commonly confirms the trend reversal before further upside movement.

Crypto trading amplifies the falling wedge’s volatility due to 24/7 markets, influencer-driven sentiment, and susceptibility to regulatory shocks. These patterns often form rapidly—sometimes within hours—and exhibit exaggerated breakout magnitudes, particularly in altcoins with lower liquidity.

In cryptocurrencies, falling wedges frequently precede “short squeeze” rallies, where leveraged short positions trigger forced liquidations that propel price movements. Crypto traders rely on on-chain metrics, such as exchange outflows and rising open interest in derivatives markets, to validate breakout signals. However, the prevalence of bot-driven trading and fragmented liquidity across exchanges increases the risk of false breakouts, making confirmation with sustained closes above resistance crucial before entering positions.

Yes, the falling wedge pattern is accurate in predicting bullish reversals. The accuracy of the falling wedge chart pattern depends on the clear definition of the trendlines, trading volume, and the strength of the breakout. When the price breaks above the resistance line with strong trading volume, the bullish wedge pattern provides an accurate indication of an upward trend.

The accuracy of the falling wedge pattern is enhanced when the trendlines are well-defined and converging. The converging trend lines form a downward wedge structure, suggesting the likelihood of a bullish reversal once the price breaks above the upper trendline.

The accuracy of the falling wedge pattern is supported by trading volume analysis. A trade volume contraction during the falling wedge chart formation signals waning selling interest. A volume spike during the breakout phase confirms the shift in market sentiment from sellers to buyers.

The accuracy of the falling wedge pattern is heightened by a strong breakout above the upper trendline. A clear breakout, accompanied by a significant surge in trading volume, reinforces the bullish outlook. The breakout distinguishes the falling wedge from other chart pattern types, providing traders with reliable insight into potential market reversals.

Yes, the falling wedge pattern is reliable in signaling potential bullish reversals and uptrend continuations. The reliability of the falling wedge pattern is dependent on market context, trading volume confirmation, and time frame. Traders increase the reliability of the falling wedge by integrating it with other technical indicators like MACD and Bollinger Bands.

The broader market context influences the falling wedge pattern reliability. The falling wedge pattern provides a reliable bullish reversal signal in stable downtrends. In volatile markets, price movements are likely to deviate from the anticipated direction.

Trading volume confirmation contributes to the reliability of the falling wedge pattern. A surge in trading volume during the breakout reinforces the bullish signal. The reliability of the falling wedge pattern decreases without trade volume validation.

The reliability of the falling wedge pattern improves when observed over longer time frames. Falling wedge chart formations that develop on longer chart timeframes, like weekly trade charts, provide reliable bullish reversal signals. Shorter time frames, such as hourly charts, are highly susceptible to market noise, which leads to unreliable signals.

The integration of various technical indicators, such as MACD and Bollinger Bands, improves the reliability of the falling wedge pattern. The Moving Average Convergence Divergence (MACD) indicator reinforces the reliability of the forecasted reversal signal when it shows bullish crossovers. Bollinger Bands strengthen the bullish trend indicated by the falling wedge chart formation when prices break above the upper band during a falling wedge breakout.

The difference between a falling wedge pattern and a descending triangle pattern lies in their implications, trendline formation, and application. The falling wedge pattern signals a bullish reversal following a downtrend correction, while the descending triangle indicates a bearish continuation or breakdown from a consolidation phase.

The falling wedge pattern features two downward-sloping, converging trend lines, while the descending triangle chart formation is defined by a horizontal support line at the base and a downward-sloping resistance line above.

The falling wedge pattern signals traders to enter long trade positions or close short trade positions upon confirmation of a bullish breakout, while traders use the descending triangle pattern to exit long trade positions or open short trade positions when a bearish breakout is confirmed.

The types of platforms where traders can use Falling Wedge chart patterns are listed below.

• Forex trading platforms: Forex trading platforms such as MetaTrader 4, Dukascopy, and Forex.com integrate technical analysis tools to identify formations. These platforms enable automated trendline detection, volume oscillators, and customizable alerts for breakout confirmation. Traders leverage multi-timeframe charting to validate pattern formation during bearish trends, while Fibonacci retracement tools aid in projecting reversal targets. Real-time candlestick data paired with volatility indicators enhances pattern reliability. Execution features allow direct entry upon resistance breaches, with risk parameters automated via trailing stops, a functionality emphasized by Forex trading brokers to optimize bullish reversal strategies.
• Stock trading platforms: Stock trading platforms like StockCharts.com, Koyfin, and TradingView offer institutional-grade tools for detecting formations in equities. These systems combine pattern-recognition algorithms with backtesting modules to assess historical performance in indices or individual stocks. Traders utilize comparative analysis against sector benchmarks to distinguish genuine reversals from false signals. Integrated fundamental dashboards contextualize patterns with earnings data or insider activity, refining entry accuracy. Conditional order types synchronize with breakout thresholds, while institutional liquidity metrics embedded by stock brokers ensure minimal slippage during high-volume rallies.
• Crypto trading platforms: Crypto exchanges such as Binance, Kraken, and CoinTrader Pro provide specialized tools for analysis in volatile markets. Real-time candlestick charts with depth-of-market overlays highlight accumulation phases preceding breakouts. Customizable alerts for resistance breaches integrate with mobile apps, critical for 24/7 markets. Platforms like CryptoView combine on-chain metrics with technical indicators to validate pattern strength. Advanced order types, including OCO (One-Cancels-the-Other), automate risk-reward ratios post-breakout, a feature prioritized by crypto exchanges to mitigate volatility risks.

The benefits of falling wedge patterns in trading are listed below.

• Trend Reversal Signal: The falling wedge pattern serves as a reliable indicator of trend reversals in a downtrend. The clear bullish reversal signal helps online traders to capitalize on the anticipated price rise by placing long trade positions.
• Clear Entry and Exit Points: A falling wedge pattern offers traders well-defined entry and exit points. A price breakout above the upper trendline signals an ideal moment to enter a long trade position. Day traders set their stop-loss orders below the lower trendline to maximize their potential profit.
• Risk Management: A falling wedge pattern enhances risk management by providing clear levels for setting stop-loss orders. The support line serves as a guide for stop-loss placement, helping traders limit losses when the anticipated breakout fails to occur.
• Volume Confirmation: A falling wedge pattern benefits from trading volume confirmation as it validates the bullish signal. The confirmation helps traders avoid false price breakouts and reduce the risk of premature entries.
• Versatility: The falling wedge pattern is versatile and applicable across various asset classes, including Forex, stocks, cryptocurrencies, and commodities. The broad applicability of the falling wedge chart formation makes it a valuable technical analysis tool for traders.
• Integration with Other Analysis Tools: A falling wedge chart pattern integrates seamlessly with other technical analysis tools, such as trend lines and RSI (Relative Strength Index). The integration of trend lines and RSI allows Forex, stock, cryptocurrency and commodity traders to enhance their trading accuracy.

The limitations of falling wedge patterns in trading are listed below.

• Subjectivity: The falling wedge pattern is subject to misinterpretation, as Forex, stock, cryptocurrency and commodity traders vary in how they draw the converging trendlines. The subjectivity impacts the accuracy of their trade analysis, which results in inconsistent interpretations of the falling wedge chart formation.
• False Signals: The falling wedge pattern is prone to generating false signals in volatile markets. Forex, stock, cryptocurrency and commodity traders misinterpret price breakouts by anticipating a sustained uptrend that fails to develop. A price reversal below the trendline causes traders who prematurely placed long trade positions to incur losses.
• Whipsaws: Falling wedge patterns are vulnerable to whipsaws in unstable markets. The whipsaws cause prices to briefly break above the resistance line before quickly reversing and continuing downward. The abrupt price movements trigger premature trade entries, which leads to losses when the price retraces below the resistance level.
• Confirmation Challenges: Falling wedge patterns face confirmation challenges that complicate timely trade entry. Traders experience delayed confirmation of breakouts, causing missed optimal entry points.
• Market Conditions: Falling wedge patterns are less effective in specific market conditions, such as strong downtrends or high volatility. Market inconsistency decreases the effectiveness of the falling wedge formation in predicting an accurate bullish reversal.
• Risk Management: Falling wedge patterns present risk management challenges due to the increased potential for false signals and whipsaws. A stop-loss placed too close risks premature exit, while one set farther increases exposure to potential losses.