Risk vs. Uncertainty

Risk: A state of uncertainty where some of the possibilities involve a loss.

Uncertainty: The existence of more than one possibility. The “true” outcome is not known.

Trading is about making decisions under conditions of uncertainty and risk. You can’t have risk without uncertainty but you can have uncertainty without risk. As an example, there is uncertainty right now in whether or not the $SPX will hold the 200 day simple moving average. There is no risk in this uncertainty if you have no skin in the game. Therefore, risk involves a potential loss, a monetary loss in this example.