As of July 13, Korea's Financial Supervisory Service reported that 1.2 million leveraged retail accounts had been hit with margin calls.

Of those, somewhere between 320,000 and 360,000 were fully forcibly liquidated by their brokers.

Principal wiped out. Gone. Some of them now owe money to their brokers on top of losing everything.

Let that number sit for a second. 320,000 people. Not hedge funds. Not institutions. Regular people with brokerage accounts who thought they were investing.

Here's how it happened….

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Korean retail margin debt hit a record 60 trillion won (roughly $39 billion) at the end of May. The market was ripping and everyone was making money.

The KOSPI was at 9,385 in June and it felt like it would never stop.

Then in late May, Korean brokers launched single-stock 2x leveraged ETFs on Samsung and SK Hynix. Within three weeks those products grew from $3 billion to $9 billion in assets which is insane growth.

92% of the holders were retail investors.

Of course they were.

Because on the way up, leverage feels like genius. You're making twice what the bloke next to you is making. Your account is growing faster than you ever imagined.

You start doing the mental maths on where you'll be in six months if this continues. You start thinking about telling your wife (do not do this). You start wondering if maybe you're actually good at this.

The dopamine is extraordinary. And it feels completely earned…

You did the research. You picked the right sector. You had the conviction to use leverage when everyone else was being cautious.

That's the euphoria talking. And it's a huge trap.

Because the KOSPI didn't stay at 9,385.

It fell roughly 30% from its June peak to 6,805 by yesterday. The 3x leveraged Korea ETF dropped 65% from its June 1 all-time high.

Goldman Sachs estimates that forced liquidations from leveraged ETFs accounted for 62% of net institutional selling on the worst single day. The leverage amplified individual losses and accelerated the entire fall.

Margin deposit balances dropped 30 trillion won in two weeks. The lowest level since February 2020.

The FSS Governor publicly said he regrets not blocking the leveraged ETF launch.

But here's what nobody is talking about, and it's the part that actually matters for you.

The financial damage is quantifiable. You can see it in the account balances and the margin calls. That part, while brutal, is at least visible.

The psychological damage is something else entirely.

Because leverage creates an emotional asymmetry that almost nobody is prepared for, and it works like this…

On the way up, the gains feel like validation. They confirm something deep about your identity. You're smart. You're capable. You saw what others missed. The profits prove that you’re able to be part of this funny gambling game.

On the way down, the losses don't just take your money. They attack that identity.

The feeling isn't ‘I made a bad trade.’

The feeling is ‘I'm incompetent.’

‘I'm a fraud.’

‘I'm worthless.’

‘My wife was right to be worried.’

‘My father-in-law was right that I should have just bought a bloody index fund.’

The downside hits twice as hard as the upside, and I don't mean that as a figure of speech.

Kahneman and Tversky's prospect theory showed that losses are psychologically weighted roughly 2 to 2.5 times more heavily than equivalent gains. Add leverage to that equation and you're looking at emotional devastation that is completely disproportionate to the original thesis.

This is why people freeze on the way down instead of executing an exit.

Because selling at a loss doesn't just feel like admitting the trade was wrong. It feels like admitting you were wrong. About yourself. About your ability. About whether you should even be doing this at all.

So you hold. You tell yourself it'll come back. You stop opening the app. You avoid the conversation with your partner. And the position keeps bleeding until the broker makes the decision for you.

That's what happened to 320,000 people in Korea over the past month.

Now look. You might be reading this thinking ‘that's them, not me. I'm not running 2x leveraged ETFs on Korean equities.’

And that's probably true.

But the mechanism is identical everywhere. The only thing that changes is the speed.

A Korean retail trader with 2x Samsung leverage who gets margin called in three weeks and you holding a concentrated Nvidia position with no invalidation level for six months... you're running the same trade.

The same emotional asymmetry. The same identity attachment to the upside. The same pain on the downside. The same absence of mechanical rules that takes you out before your emotions and disaster take over.

The difference is their reckoning came in days. Yours might take quarters. But the destination is the same if there's no exit framework.

Every portfolio without predefined invalidation levels (not based on silly, subjective support and resistance by the way) is one reversal away from the same psychological spiral those 320,000 accounts just went through.

And the compounding cost isn't just financial. It's the erosion of confidence. It's the voice that starts asking whether you should just give up and buy an index fund.

It's the slow retreat from a game you're actually capable of winning if someone had just given you the mechanical structure to manage the exits instead of leaving you alone with your emotions at the worst possible moment.

That structure is exactly what we build inside the Academy. You learn to predefine your invalidation levels, manage position sizing mechanically, and remove yourself from the decision at the precise moment your psychology is loudest. You stop being a participant in your own emotional spiral and start operating like a practitioner who respects risk.

If any of this hit close to home and you want to talk through your current portfolio, your process, or your risk management (or the lack of it)... I'm opening up 30-minute calls to do exactly that.

No pitch. Just a conversation about where you are and what's exposed.

You can book a slot here: Book your 30-minute call

P.S. Honest question, and I'd genuinely like to hear your answer. Hit reply and tell me...

If your largest position dropped 40% tomorrow morning, do you have a predefined level where you exit? An actual number written down somewhere? Or would you open the app, feel sick, and start negotiating with yourself about whether to hold?

If the answer is the second one, you don't have a risk management framework. You have a hope strategy. And Korea just showed you how that ends.

I read every reply.

David Fink Money