We all have our own horror stories of the financial crisis and no doubt have heard countless iterations of others’ woes. Fear causes us to do some dumb things, no question. When it comes to losing money, research that suggests a loss of a thousand dollars impacts us much more than a thousand dollar gain.
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