The issue of trading during uncertain times was recently discussed on the Mentor Program Alumni forum, prompting me to reconsider my response. Defining Uncertainty To address uncertainty, we must first define it. Using volatility as a proxy, we find that the VIX (fear index) and historic volatility in the Dow are currently at or near long-term averages, indicating that market participants do not perceive increased uncertainty. Market Uncertainty vs. Psychological Uncertainty The actual issue may not be market uncertainty but rather uncertainty in decision-making due to external influences. If we ignore external commentary and focus solely on market data, what would it reveal? Wikipedia defines uncertainty as "a situation involving imperfect and/or unknown information." However, this definition is too broad for our purposes, as uncertainty is inherent in predicting future events and is a default setting in trading. The Role of Narratives What changes is the tone and intensity of surrounding narratives, which can impact traders' psychology. The media's sensationalism creates a distorted view of reality. Context and Market Metrics To bring equilibrium to the noise, we must consider context and market metrics. Markets define uncertainty through accessible metrics like volatility and risk premiums. Key Points - Uncertainty is inherent in trading and predicting future events. - Market participants' perception of uncertainty is reflected in volatility and risk premiums. - Narratives and external commentary can distort traders' perception of uncertainty. - Focus on market data and metrics to assess uncertainty. Conclusion To navigate uncertain times, traders must distinguish between market uncertainty and psychological uncertainty, focus on market metrics, and be mindful of the impact of external narratives on their decision-making.