Definition ∞ Risk reward skew describes the imbalance between the potential profit and potential loss of a particular cryptocurrency trade or investment. A positive skew indicates a greater potential upside compared to the potential downside, while a negative skew suggests the opposite. This metric helps traders evaluate the attractiveness of a trading opportunity. It is a key consideration in strategic asset allocation.
Context ∞ In crypto trading, news often references risk reward skew when discussing speculative positions or market opportunities with asymmetric outcomes. Analysts use this concept to explain why certain trades are favored despite high volatility. Understanding risk reward skew is important for making informed decisions in digital asset markets, balancing potential gains against the possibility of capital depreciation.
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