Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Welcome back to Patrick Boyle on Finance. Today we're going to talk about the use of leverage in

trading and how it might affect your trading returns. We'll look at a few lessons from the world of

gambling and see what a trader might be able to learn from professional gamblers. We'll discuss

whether anyone can easily make a living as a day trader. Okay, so the first thing we can discuss

here is how smart are the people that you're trading against in the market.

An awful lot of the online trading coaches like to tell you that you can spend 15 minutes

a day trading from the beach and compound massive returns.

In fact, I think I even saw a video a while ago of some guy like trading from a helicopter

above London, which I imagine means a very slow

internet connection, if nothing else. The reason that you'll get such great returns is that

they're going to teach you some amazing tricks and that you're competing against what they call

dumb money. The idea is that when you buy a stock, you're buying it based on their really smart

system, but the person selling it is some old person selling it in order to pay for their

retirement, and that person doesn't have a clue. I can tell you first off that most of the people

that you are trading against are full-time traders and they're very smart.

One of my friends that I used to work with is a physics PhD who became a trader after about

10 years of working on the Large Hadron Collider in Switzerland. He now works at a large bank

writing algorithmic FX trading strategies that truthfully will eat you alive if you don't

know what you're doing. When he started at his current firm, a group of his more senior colleagues

I remember complained to his boss that his trading was destroying their P&L. His boss told them

that they had better just come up with better trading strategies then.

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