Who this is for — Traders who want to quantify the direction of asymmetry. Also useful when building portfolios and balancing strategies with different payoff profiles.
In plain terms — Skew tells you whether the distribution is "pulled" toward large gains or large losses.
Prerequisites — Complete Silver path first (min.: Setup, Expectancy, Win rate, Sample size). Foundation: Bronze path.
Positive, negative, and neutral skew
Positive skew means a heavier right tail: few very favourable events. Negative skew indicates a heavier left tail: risk of extreme losses. Skew near zero does not guarantee safety, but suggests more balance between extremes. In practice skew complements Asymmetry and does not replace variance.
Example — A breakout strategy often has positive skew: it loses little and often, but when the trend runs it generates gains much larger than average.
Operational use on the Gold path
Skew helps combine complementary strategies in a portfolio view. Adding a positively skewed component can improve resilience in directional phases. If skew is strongly negative, strict stops and more prudent size limits are required. For extreme events it must always be integrated with Fat tails analysis.
Card
- What it is: statistical measure of asymmetry direction.
- How to use it: assess tail risk and strategic mix construction.
- Typical mistake: using it alone without dispersion and drawdown.
Gold path — Module: Edge and statistical advantage. Part of Gold path.