Episode 123 -- Darren Reed (107:04)

Great episode, this guy is the real deal.

Former stock broker, former head trader at hedge fund, currently a prop trader
Grew up in South Africa
Went to public school, rugby team was good, wanted to play first team rugby
School bred attitude of grit, though underdogs through teamwork they can beat the rich kids
Dad is airline pilot, started as mechanic, parents immigrated to Australia (Perth)
Loved the team culture, loved competition
Uncle a pastor in Connecticut (Stamford and Greenwich) hooked him up with hedge fund guys
Interned at New York hedge fund just out of university
Felt at home whe he first saw the trading floor, the energy, the competitive spirit
Started in back office, lots of tedious, menial labor (that has since been automated)
Visa issues, had to go back to South Africa, parents said come to Perth
In Perth 2004 -- just good timing, mining boom, vast wealth creation [because of China demand]
First job: retail desk assistant at brokerage firm, did grunt work
"DTR" -- designated trading representative (licensed position to enter orders)
"DMA" -- direct market access
Watching order flow all day tick to tick
Good execution appreciated by brokers, everything automated now though
He held the order book, could feel the order flow, developed a sense of the market
Takes time to develop your craft, later can take advantage when opportunities arise
Algo execution killed the old manual order book
"Making chicken shit look like chicken salad" in sales [love it!]
You must be self-aware
Moved to Sydney, started trading at prop firm
He had success early on which is the *worst* thing that can happen to you
Skills have learning curve, baby learning to walk, surfer falling off board
Profitable at beginning through blind luck, got cocky
Intuitive sense developed through watching trading book
Be at your worst when you're at your smallest
Learning curve as a trader steep, you are losing money, it's hard
He was a one-trick pony, could make money in volatile environment, was lost when volatility died
Froufrou fairy dust theory of why you get hurt repeatedly at first: it's all karma
Doesn't use charts much
Tries to figure out who is trapped, who is under pressure
Read order flow on a tick by tick basis
Australia prop traders futures-based, like Europeans
2008 blew up all the volatility traders
Markets change, advantages get arb'd away
You need a diversified trading group -- different strategies, different products, different time frames
Got a job at Sydney hedge fund, $300MM under management
Took old Darryl's advice: "Get your bum in a good seat and sit tight."
Hedge fund world highly regulated, he hated meetings, crossing t's, wanted to quit and did so
Trader development is serious biz -- handling hopes and dreams of kids
Qualities of good trainers: self-aware, know their strengths and weaknesses, honest transparent people, doesn't cover up weaknesses, you can't "solve" trading or golf, not a glamorous lifestyle, no Ferraris or phoning it in from a yacht [LOL]
Trading is a grind, bloody hard, don't believe the BS
Guys who admit bleeding, re-learning, evolving, they're real, seek them out
Qualities of good trainees: they have grit, bulldogs who won't let go, will take YEARS of struggle and grind; guys who have had hardship are best, they can grind; people who don't let go of their dreams; competitive drive; intelligent but not TOO intelligent; people who are too smart try to figure things out, that's why they fail; empty cups, no experience best; put the work in themselves, don't expect to be told what to do
Not about being given "set-ups," it's about developing skill
"Environment is everything" -- special forces, great teams, lifted by pack in right environment
Trader sitting at home can't replicate prop trading environment
Need little financial encumbrance to start, can't have pressure to make money
Research the prop firm first, ask good questions
Need one or two year profitable track record (can be misleading if sample size small)
Pass the "pub test," no track record but enthusiastic
Mow lawns and wash cars to build a trading stake
Must work your ass off, sitting staring at screens for hours on end, no glamour, incredible grind
Incredibly boring work in a sense, no one talks about this [Twitter as outlet]
Income is incredibly variable, struggle for 50 weeks, make a killing [or get killed] in two weeks
Pressure of being a solo small business, live and die by your own hand, hard struggle day after day
People denigrate competition and achievement now, society getting weaker, why people are struggling, [Yes, western world in decline, standard of living deserves to fall]
Trading not fun and games, bloody hard work
www.CygnetTrading.com.au
Twitter: @LiftTheOffer