Skewness

Skewness describes asymmetry of returns from the normal distribution. It can come in the form of negative skewness or positive skewness, depending on whether data points are skewed to the left (negative skew) or to the right (positive skew) of the data average.

Skewness

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Skewness risk is the risk that a model assumes a normal distribution of instrument returns when in fact the returns are skewed to the left or right of the mean. A positive skew indicates that the tail on the right side is longer than the left side and the bulk of the values lie to the left of the mean. A zero value indicates that the values are relatively evenly distributed on both sides of the mean, typically (but not necessarily), implying a symmetric distribution.
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Skewness In A Nutshell

Skewness is important to understand because it can allow investors to get a better understanding of where the market is at and where it may go. It is important to take a look at the data with an open mind, but also understand that this data could only be driven on price depending on how it is figured.

Skewness is a term that is typically found in statistics, and statistics is used in standard deviation and other investing and trading setups. Skewness is taking a point on a data set and seeing how far is varies from the normal distribution within that data set. If you look at chart, it can skew left or right of the normal distribution area.

Closer Look at Skewness

When using statistics, it takes out part of the human emotion element and allows investors and traders to look strictly at data. Statistics plays a large role in the investing and trading community and should be understood at least at a basic level. Skewness also can help you determine the probability of an event happening or you can combine it with other statistical data points.

There are endless conversations, studies, and write ups on how to use statistics and it is an endless mine of information. Be sure to go through what you believe is important and dig deep, understanding how those numbers are created and factors go into them. Join an investing and trading group can greatly benefit you by having the ability to bounce ideas off of active market participants. Open a demo account and give the different points a try, seeing what can benefit your current trading and investing setup. Also, if you consult an investing professional, they can help you determine the best path to take.

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