Some traders believe that a stop loss is always necessary in any systematic trading strategy, primarily as a risk management measure. Other traders believe that a stop loss can do more harm than good, and a well diversified trading portfolio should not need stop losses. Both sides are right and wrong at the same time, but this is a more complicated conversation that goes beyond the scope of this post. Zorro Trader offers a multitude of stop loss options.
For the novice algorithmic trader, we believe a stop loss is necessary, especially when one uses lagging indicators with long formation periods. Moving averages are a good example. A bad trade would end eventually based on your own crossover exit signal, but a stop loss should get you out of the loosing position sooner.
by Algo Mike
Experienced algorithmic and quantitative trading professional.