A leaning scale

Every fill changes your position, and a position carries risk. Skewing means shifting both your bid and your ask in the same direction to push your inventory back toward flat. After repeated buying from you, you are short and the market may know something, so raise both prices: a higher bid attracts sellers who cover your short, and a higher ask discourages further buyers. If you are long, skew down. A simple rule skews the center of your quotes by k ticks for every unit of inventory: center = fair - k × position, with position positive when long. Interviews test this when they trade against you several times in a row and ask what you do next.

Words you need

Edge: Your expected profit per trade or bet. Positive edge means you win on average.
Bid and ask: The bid is the highest price a buyer is offering right now; the ask (also called the offer) is the lowest price a seller will take. To sell immediately you sell at the bid; to buy immediately you buy at the ask.e.g. A market '99 at 101': bid 99, ask 101.
Quote (making a market): Stating a bid and an ask together, as 'bid at ask'. You promise to buy at the bid and sell at the ask.e.g. '99 at 101' means I buy at 99 and sell at 101.
Fill: Your order actually traded. 'My bid got filled' means someone sold to me at my bid.
Position (inventory): What you currently hold. +3 means you own 3 units; −3 means you sold 3 you did not own (short).
Long and short: Long: you own it and gain if the price rises. Short: you sold it without owning it and gain if the price falls.

Why it works

Moving both quotes toward the side that reduces your position makes reducing trades more likely and adding trades less likely, at the cost of some edge on the reducing side.

center = fair - k × position; bid = center - h; ask = center + h

Spot it: Counterparties keep trading the same direction against you.

Technique reference and sources

Think of your inventory as weight on a scale. Long inventory tips you one way, so you tilt your prices the other way to invite trades that unload it. The more units you carry, the more you lean. With k = 0.5 tick per unit, a short of 4 units tilts both quotes up by 0.5 × 4 = 2 ticks.

When this method fits

Counterparties keep trading the same direction against you.
Your position is growing past the size you are comfortable carrying.
You suspect repeated one-sided flow is information about fair value.
An interviewer asks what you do after being lifted three times in a row.

Count the inventory. Net your fills: buys add units, sells subtract. Long is positive and short is negative.
Compute the skew. Skew = k × position in ticks, applied against your inventory. Long shifts quotes down, short shifts them up.
Move the center. center = fair - k × position. Then set bid = center - h and ask = center + h with your usual half-width.
Check the cost. On the reducing side your price moves toward or past fair value. Know how much edge you give up and at what position that edge reaches zero.

Skew rule: Center of the quote is fair value minus k times the position.

100 - 0.5 × 6 = 97
100 - 0.5 × (-4) = 102

Size of the skew: Both quotes move by k times the number of units held.

0.5 × 6 = 3
0.25 × 4 = 1

Flow as information: One-sided flow can mean the true price has moved, so you may also move fair value itself. The size of that move is your judgment, not a formula.

100 + 3 × 0.5 = 101.5
100 + 2 × 0.25 = 100.5

Common traps

Raising only the ask after being lifted, and leaving the bid where it was. Skew moves both prices. The higher bid is what attracts sellers to cover your short; the higher ask alone just discourages business.

Skewing the wrong direction by treating a long position like a short. Long means too many units, so lower both prices to invite buyers. Short means too few, so raise both prices to invite sellers.

Skewing so far that you quote through fair value on both sides. Beyond a position of h / k, the inventory-reducing quote has negative expected edge against the unadjusted fair value. Cap the position or widen instead of giving away edge on the reducing side.

Another example: How much inventory before the skew eats the edge?

The ask is fair + 2 - 0.5 × position
It equals fair when 0.5 × position = 2
Position = 2 / 0.5 = 4
Check at 4 units: center = 100 - 0.5 × 4 = 98, ask = 98 + 2 = 100

Source notes

These explanations and questions are written for QuantArc. Links show the underlying mathematics and learning design.

Figgie (Jane Street)
Landing page checked: Jane Street's card game that simulates elements of markets and trading, with rules, a tutorial and a learning mode. Practice companion only; its rules and strategy tips were not reviewed against these lessons. Lesson examples are original.

tradermath.org market games
Listing page checked: browser games including market making on dice, a card market-taking game, Fermi estimation and a trading game. Practice companion only; game content was not played or reviewed against these lessons. Lesson examples are original.

IES: Organizing Instruction and Study to Improve Student Learning
Supports worked examples, retrieval, explanations and spaced study. Does not establish QuantArc's exact lesson length, mastery threshold or review intervals.