The Quarters Theory

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The Quarters Theory description

Do you believe that everything happens for a reason? I haven’t always been a strong proponent of this theory, but looking back at certain events in my life has made me a believer.

I was introduced to the “forbidden” world of foreign currency exchange in communist Bulgaria at the tender age of eight, when in 1979 my father was arrested by the communist militia because of his involvement in a black market currency exchange. My family was told that my father owned and dealt with those “evil” U.S. dollars, British pounds, German marks, and other foreign currencies that the “capitalist pigs” use to buy their “rotten” goods and services “produced with the blood, sweat, and tears of the proletariat.” It was a true baptism by fire.

To prove that the apple doesn’t fall far from the tree, as a high school and a college student, I made money soliciting currency exchange from foreign tourists and foreign exchange students, and exchanged currencies on Magura Street (communist Bulgaria’s black market version of Wall Street). Is it any wonder that I turned out to be a currency trader?

My life’s experiences have taught and continue to teach me some valuable lessons that I apply in my trading. But as a trader, I will admit that nothing educates and disciplines better than the most devastating loss that a trader can ever experience in his or her career. I’m not talking about the periods when you hit the wall after you’ve been on a roll and are feeling invincible. One can learn to get over those fairly quickly. What I’m referring to is the big one, the tsunami that shatters many months of hard work and consistent profits with a violent blow that lasts only a few minutes.

My big one was planned to be exactly that—big. However, it was supposed to be a winning big one. This was to be the one that takes a trader into the stratosphere of trading greatness, delivering a life-changing 1000+% return. So, as Jesse Livermore would have said, I “took the plunge.” I’d had a great sequence of several big winning months before and I felt that I was bulletproof—exactly the right mixture of self-confidence and arrogance that was enough to blur the lines between a trade and a gamble, and to make me throw almost my entire account at this trade. All went out of the U.S. dollar and all went in Euros and Swiss francs as soon asColin Powell made the case for the war in Iraq to the United Nations.

My conceited mind was so certain about the success of this trade—after all, it’s been historically proven over the past 200 years that when the United States goes to war, the U.S. dollar goes down. My ego had blindsided me so much that I didn’t even bother placing any stops to protect myself.

After all, why would I need any protection if I was invincible? You’ve probably already figured out how this story ends. The tsunami of hundreds of PIPs against me right after the war announcement was enough to make me spend the rest of the day picking up the pieces of what was left of my trading account and licking the wounds of my traumatized trader’s psyche.
It was a devastating experience, but I am grateful that it happened to me, because in the days and months of soul searching that followed, I became a born-again trader with a revived mindset and a completely new trading method.

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