As I understand the article the "robots" would have done more or less ok. It was human intervention that caused more losses.
This is exactly what not should happen when investing longterm: Being driven by emotions rather than rational facts.
This is exactly what not should happen when investing longterm: Being driven by emotions rather than rational facts.
Putting a limit on one's potential losses is pretty rational, not emotional. Models are not perfect, and you do not want to find yourself with high paper losses when they fail.
Of course, if your models don't work well together with stop-loss limits, then that's a problem.
At least here they say that it is not a good idea with a quant approach: http://en.swissquote.com/epb/support/faq#node-301
The BlackRock example plus the fact that many ETFs beat managed Funds in terms of performance seem to support the position that human interference is in most cases for the worse.
You'll have a bad time if you think your model is infallible.
By bugs and adverse selection I'm assuming you're talking about something like automated market making. For traders like that, a loss limit makes sense because of technology risk. If your order router has a bug like Knight's did, or your data feed gets stuck, you can lose a lot of money very quickly.