The forex market can wipe out trading accounts in seconds. While traders rely on technical analysis and economic data, some of the biggest losses have come from market crashes that no one predicted. These events, known as “black swans”, have reshaped how brokers operate and forced regulators to implement stricter controls on retail trading.
The Swiss Franc Crash (2015)
At 10:30 AM on January 15, 2015, the Swiss National Bank abandoned its euro peg, sending the franc up 30% in minutes. This peg had been in place since 2011 to protect Switzerland’s export economy. When it broke, retail traders’ accounts plummeted into negative territory. Major banks also reported substantial losses – Deutsche Bank lost $150 million, while Barclays lost $27 million.
The impact on forex brokers was severe. Alpari UK, a major player in the retail forex market, collapsed that same day after suffering $225 million in losses. FXCM, then the largest retail forex broker in the US, needed a £200 million emergency bailout from Leucadia National to stay solvent. The event wiped out FXCM’s entire market capitalisation.
Brexit’s Sterling Crash (2016)
When the UK voted to leave the EU, sterling suffered its largest single-day drop since 1985. The crash triggered margin calls across the industry, with some brokers reporting their highest ever trading volumes. The Bank of England intervened, with Governor Mark Carney pledging £250 billion in support to stabilise markets.
The Lehman Crisis (2008)
Lehman Brothers’ bankruptcy filing from New York on September 15, 2008 sparked chaos in currency markets. With $639 billion in assets and $619 billion in debt, it was the largest bankruptcy in US history. The dollar and yen surged as investors fled to safe-haven currencies.
The impact rippled through emerging markets. The Korean won fell 9.7% in one day. The Mexican peso dropped 17% over two months. Currency volatility hit 1970s levels. The Russian ruble fell sharply against the dollar as oil prices collapsed. Iceland’s krona dropped so severely the government had to suspend forex trading.
Black Wednesday (1992)
On September 16, 1992, the British Pound experienced one of its most dramatic falls in modern history, an event now known as Black Wednesday. The UK had been part of the European Exchange Rate Mechanism (ERM), an arrangement that required the Pound to stay within a narrow trading band against the Deutsche Mark. However, with inflation in the UK running higher than in Germany and the economy under strain, the government struggled to keep the Pound within this tight range.
As tensions rose, George Soros, a Hungarian-born investor, saw an opportunity. Soros believed the Pound was overvalued and that the UK would be unable to defend it. Betting against the currency, he placed a massive short position—one of the largest in history. Soros predicted that the UK would be forced to devalue the Pound, and when the government made a last-ditch effort to keep the currency stable by raising interest rates, it only worsened the situation.
The government was eventually forced to withdraw from the ERM, and the Pound plummeted. Soros’ gamble paid off handsomely, earning him around $1 billion in profit. His involvement in the crisis earned him the moniker “The Man Who Broke the Bank of England”.
Protection Against Market Crashes
No one can predict these crashes, and no amount of risk management can save traders. After the Swiss franc crisis, regulators across the world called for tighter controls on leverage available to retail traders. The FCA mandated negative balance protection and reduced maximum leverage from 1:100 to 1:30. Similar regulations followed across Europe through MiFID II, forcing brokers to provide greater transparency and risk warnings.
These crashes transformed forex trading. Brokers must now stress-test their systems against extreme volatility. Many increased their capital requirements and revised their risk models. Some exited the retail market entirely, deciding the risks outweighed potential profits.
For traders, these events proved that technical analysis and fundamental research aren’t enough. Black swan events can overwhelm any trading strategy. Success in forex requires preparing for the worst while hoping for the best.
