Stops aren't for investors, so "tracking the market" isn't relevant here. Investors get their returns primarily from dividends and possibly (based on luck) fro

Stops aren't for investors, so "tracking the market" isn't relevant here. Investors get their returns primarily from dividends and possibly (based on luck) from buying low and selling high, on the rare occasions they sell. Traders get their returns primarily from buying low and selling high at a later time as well as other strategies such as various forms of arbitrage. Trading is itself a business, and as such a trader's returns do not track an index any more than a single arbitrary company's profits do. A trader will usually have many positions open, and successful traders have a plan for every position. Stops are one tool that a trader can use to execute that plan, usually to cut their losses on one of the many trades that they know will go against them. A loss on a particular position is not a disaster and every trade's plan accounts for the possibility of having to exit with a loss. This is much more important to traders than investors because traders make or lose money based on the behavior of the market; investors make or lose money based on the success or failure of the underlying businesses they own, so buying or selling an asset based on market behavior is not appropriate. Traders are well aware of the risks of using stops: information leakage (stop-hunters), exposure to bad data, and bouts of illiquidity. Some of those risks can be mitigated by using stop-limit orders instead of the normal stop-market type, but not all, and stop-limit orders carry the risk of accumulating additional losses without exiting. Everyone knows all of these things; there are no surprises. Weep not for the unfortunate trader. He knows it's just part of the business.