Talk about a falling knife !, page-91

"Eventually you'll learn that you can't ever know for sure what a stock is going to do and you must manage your risk, the only way to do that effectively is to cut your losses while they are small."

Not everyone is in a loss but there are stop losses and stop profits where you set stops to protect a profit. They both sound like good ideas but in reality both will probably make you sell almost every stock you ever buy every time it has a significant correction. Any one that bought LTP on the prospectus should have got stopped out by 25c after a gradual but relentless six month decline before the stock finally ran hard. If you do get stopped, do you get back in when it runs hard again? You could be selling corrections and buying peaks and losing money on many trades even in a strong uptrend. Or do you stay out and miss out on a stock that might go up ten fold after your initial stop loss?
There are definitely times when stop losses will save you money but there are many more times when it will stop you from making money. Every situation will be different. I don't like stop losses. They would have got me to sell all of my best winners at some stage before they became big winners.
The biggest example for me was Andean Resources that I bought prior to the GFC at 9c, sat through a decline to 4.2c (still before the GFC) and I sold half using a stop profit after doubling at 20c and the rest at 30c. Good returns but the stock went on to get taken over at more than $5. You'll never sit through the biggest returns if you use stop losses but you will also miss some bad losses if you get a stock wrong. So, I prefer to do everything I can to make sure I get a stock right and lately I've learned to diversify a bit more in case I do get one wrong. If you get 3 right and let's say they each double over a few years and get 1 wrong and in the extreme case let's assume it goes to zero, an original $4,000 spread evenly would return $6,000 or 50%. If the dud breaks even after a few years (more likely than going to zero), the return is $7,000 or 75%.
So back to your quoted statement above, stop losses are not the only way to manage risk and in my opinion, not a good way either. I think diversification is a much better way but we all have our own methods and preferences. You are also correct in that you can never know what a stock will do but that also applies to a stock potentially rallying hard from your stop loss exit - and sometimes they will.
The market is not easy. Experience will teach that to everyone. Stop losses can hurt as much or more than they help and diversification across stocks doesn't necessarily help in a strong bear market. However with enough experience and learning, some will beat the market long term.