Taken from another thread.
“The placement of stops and limits is a critical component to successful trading. Stops are put on a trade to take a trader out of a trade at a predetermined point at a worse price than the current price. Think of them as a safety net, that will prevent you from losing more money on this trade. Stops are often set based on a certain percentage of loss relative to the size of the trader’s account, or based levels of support and resistance. These are two of the more widely used criteria. Whatever method is chosen, it is imperative to have a protective stop in place on each and every trade that is placed. Without them, a trader leaves themselves open to potentially catastrophic losses.”
I think this is utter bullsh*t.