[malteof]

> Many people and brokerages went broke in a matter of a minute.

I was here then as well, I somehow doubt many people went broke... It only went from being pegged at 1.2 dropping to around 1.0 as far as I remember. How would this cause anyone to to broke?

[H8crilA]

Leverage and the necessary stop losses. Much of forex trading is done on high leverage, and as such requires stop losses. For example at 10x leverage you can only sustain a 10% drop, even if it is very short, before your margin gets burned and the position forcibly liquidated. For a similar example look up the $SVXY long term chart (the event was called the volpocalypse, CBOE has a write-up on that).

Naturally there is no guarantee that a stop loss can be executed at any predetermined price - the market can just fly by your desired exit point without stopping there. This leads to huge losses when the position is actually liquidated, below the desired stop loss point.

The Talebs of the markets win a shit ton of money on days like that. Not sure who made money on chf/eur depegging (other than CHF deposit/bonds holders :) ), but volpocalypse was the cashout day for the mystery "50-cent trader".

[zeusk]

Because forex trades can be levered a lot more than the usual equity instruments for consumers.