Chief executive Jamie Dimon blamed “errors, sloppiness and bad judgement” for the losses and warned “it could get worse”.
The risky hedging strategy could cost the bank an additional $1bn, he added.
Mary Schapiro, the head of the US market regulator the Securities and Exchange Commission, said that “all the regulators are focused on this”.
But she did not give any more details about possible action by her agency.
Shares in other US banks fell, including Bank of America which lost 2.4%. European banking shares also suffered, with Barclays down more than 3.5% and Deutsche Bank falling 1.6%.
Overall, after accounting for other gains, losses at JPMorgan’s chief investment office (CIO) are estimated to come in at $800m in the second quarter.
The strategy taken at the CIO unit, run by Ina Drew in New York and Achilles Macris in London, had been “riskier, more volatile and less effective” than previously believed, Mr Dimon said.
“These were egregious mistakes,” he said. “They were self-inflicted and this is not how we want to run a business.
“It could get worse”, he warned. “This could go on for a little bit.”
It is the surprise factor – the shock evinced by Mr Dimon – that will reignite the debate about whether regulators need to take more decisive action to curb the complexity of investment banks, to better prevent this kind of accident.”
The CIO is an arm of the bank used to make broad bets to hedge its portfolios of individual holdings. Hedging is an investment practice used to reduce the risk of price fluctuations to the value of an asset.
Attention has focused on the activities of Bruno Michel Iksil, a London-based JPMorgan trader known as the London Whale, who reportedly made big bets on the financial markets as part of this hedging strategy.
But a source close to the bank told the BBC: “We’re not talking about a rogue trader here. His was one trade in a big portfolio of trades. It was a global hedging strategy known by the bank but executed poorly. It failed.”
The trading loss, revealed in a regulatory filing, is expected to hurt JPMorgan’s overall earnings in the quarter, and will come as an embarrassment to the bank.
It had emerged from the 2008 financial crisis in much better health than many of its rivals after avoiding risky investments that had hurt others.
“We will admit it, we will learn from it, we will fix it, and we will move on,” Mr Dimon said.
He added that the bank was trying to unload the portfolio in question in a “responsible” manner in order to minimise the cost to shareholders