Which way is more effective?

I would like to know which way is more effective when learning English by talking with a native speaker.

One way is that during the conversation the teachers stops the student whenever he makes a mistake, no matter if it's a grammar one or the student used a wrong word or phrase. The good thing about this way is that the student will get corrected for every mistake he makes and he will have a deep impression and is not likely to make the same mistake again. The bad thing about this is that the conversation is not as smooth as it should be and both the student and the teacher might forget what their original topic is if too much time is spent on the correction.

The other way is that the teacher lets the conversation go on and ignores the mistakes the student makes, as long as he knows what the student is trying to express. This way the student will gain confidence and gets used to expressing his ideas in English gradually, however at the same time the mistakes he made will be strengthened.  I mean, he will get used to the mistakes he has made as well because he is always repeating his mistakes.

Which way do you think is more effective?

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ANSWER

Never do anything to hurt the student's confidence!   If you discourage the student they will stop trying, or at least stop trying as hard.   If you encourage the student they will try extra hard, and the student (or child, or friend) will always try extra hard to live up to your expectations.   Nobody wants to disapoint.