Danger Of Using "Stop Loss"

[Clement]

It is not a useless tool. It is a contingency tool that most of us hope we never have to use. Putting a stop loss does not mean we hope it will trigger. As much as we try to avoid making investment mistakes, they do happen. A stop loss just prevents our investment mistakes from losing us too much money. Does that help or hinder us in any way when the point is to TRY not to lose any money at all.

IMO, the tool is not useful for value investors. Value investors focus on value, than price, but "stop-loss" works on price alone.

True. However price is not useless as it is the market's best estimate of it's current value. We might have a different opinion but I think it is unwise to discard the market view entirely. The question is how sure are we that we have covered all the bases and found value and how large of a loss do we face if we are found to be wrong. After a certain point, I think it is wise to stop and re-examine our thesis again and a stop loss enables us to do so without exposing us to further losses. If we find it satisfactory, we can always buy back in.