“You Don’t Want to Prop Trade with Someone More Focused on Showing Off Their Lamborghinis”

“Prop trading is about more than just profits; it’s about discipline, resilience, and the ability to adapt,” says Kathy Lien. Known for her extensive career in forex markets, Lien recently released Prop Trading Secrets (Wiley) alongside Etienne Crête. The book compiles interviews with traders, including champions of international competitions and industry veterans, to uncover strategies, personal anecdotes, and insights into this evolving space. In this Finance Magnates interview, she touches on key topics such as broker-backed prop firms, the importance of resilience, and the impact of AI on trading.

The Value of a Trusted Voice

“Prop trading has quickly grown into a vital part of the financial ecosystem, yet it remains an area where reliable guidance is in short supply,” replies Lien when asked why she thought a book was necessary while webinars, podcasts, and online courses flood the market.

According to her, many traders, especially newcomers, struggle to distinguish between credible sources and opportunistic voices. “It’s hard for new traders to understand who really has the trading experience and who has traded for more than two months,” she claims.

Lien’s book seeks to fill this gap by providing a comprehensive narrative that encompasses not only newly funded traders but also seasoned professionals who have been active for decades. “The interviews include traders who have been in the market for 5, 10, even 30 years,” she explains, emphasizing the depth of knowledge shared by these veterans.

Building a Network of Expertise

The diversity of traders featured in Prop Trading Secrets is one of its defining strengths. Lien recounts her meticulous process of selecting contributors: “I started by categorizing the type of people I wanted to speak to. There are three trading champions, including Rob Hoffman, a multi-time winner of international trading competitions, and a winner of the Robins World Cup futures trading championship.”

She also wanted to include traders who transitioned from prop trading to managing funds, reflecting the career progression within the industry. For instance, Lien features Jean-Francois Boucher, a cancer survivor whose disciplined approach emphasizes learning how to lose before chasing profits.

“Some of these traders have been so successful that they are now managing money,” she says, adding that she also worked with leading prop firms to identify standout performers. “I asked them for their best traders, reviewed their results, and selected those with the most compelling interviews and strategies.”

One particularly intriguing profile is that of Aatu Kokkila, a Darwinex trader who transitioned from being a top World of Warcraft player to a successful prop trader. Lien highlights how Ayatu’s gaming skills translated directly into his trading success. “A lot of the skills he honed in gaming translated into his trading,” Lien notes, highlighting the unique backgrounds of her interview subjects.

Lessons from Two Decades in the Market

Lien’s personal journey in trading dates back to 1999, when she joined JP Morgan’s FX trading desk at just 18. “At the time, the euro had just launched, and I was learning how to trade forex as a market maker,” she recalls. After a stint in proprietary trading at JP Morgan, she transitioned to research, co-founding DailyFX and authoring six trading books.

Reflecting on her trading philosophy, Lien states, “The way I trade now is pretty much the same as in my early years—though more refined.” She observes a similar pattern among the traders she interviewed: “They started with fundamentals, and they’re still doing fundamentals. They began with breakouts, and they’re still using breakouts. Their strategies evolve, but their core approach remains consistent.”

The Key to Prop Trading Success

When asked what it takes to thrive as a prop trader, Lien emphasizes discipline and consistency. “Prop trading is different from trading your own funds. There are strict rules around consistency and drawdowns. Firms value small, consistent wins over big, flashy trades,” she says.

Lien shares that many successful prop traders approach their accounts with a cash flow mindset, focusing on monthly expenses and realistic profit targets. “For example, if you need to make $3,000 or $10,000 a month, you have to break that down into achievable daily or weekly goals within the firm’s parameters,” she explains. “It’s about accumulating small profits and not relying on one or two big winners.”

Resilience, Lien argues, is equally critical. “You need to learn how to lose in so many different ways. You need to learn how to make sure those losses are manageable within your overall return,” she explains.

According to Lien, seasoned traders often focus on mastering one instrument, allowing them to develop a deep understanding and avoid overextending themselves.

Fly-by-night Prop Firms

Lien also touches on the broader trends shaping the prop trading landscape, particularly the rise of broker-backed prop firms. “There are too many fly-by-night prop firms run by inexperienced individuals. Broker-backed firms bring legitimacy to the industry,” she says. These firms, she explains, have more robust infrastructures and are often subject to higher regulatory scrutiny, making them more appealing to traders.

Lien acknowledges that the industry’s rapid expansion has also led to scams and questionable practices. “Traders need to do their homework. Look at the firm’s longevity, leadership experience, and resources,” she advises. She cautions against firms with flashy marketing and no substance. “You don’t want to trade with someone more focused on showing off their Lamborghinis than providing value.”

Here to Stay

Looking ahead, Lien predicts continued growth and evolution in the industry. “Prop trading is here to stay. More brokers will enter the space, and we’ll see traders diversifying their accounts to include both prop and broker accounts,” she says.

Lien also foresees regulation playing a larger role in legitimizing the industry. She observes, “While AI is affecting some markets, it really doesn’t impact traders who are focusing on major, highly liquid markets like forex, gold, or NASDAQ.” This focus on core markets, she explains, allows traders to adapt while navigating the evolution of trading technologies.

As for her hopes for Prop Trading Secrets, Lien aspires for it to be a practical guide for traders at all levels. “I want readers to shortcut their path to success by learning from the mistakes and strategies of experienced traders,” she says.