First Rule Of Investing:Cutting Losses(4)

Q: How do you define short?

O’Neil:

For Loeb, it was 10%, which is probably a good rule for most beginning investors.

But when you use charts to time your purchases more accurately,

I recommend cutting all losses at 7% or 8% below your purchase price.

By doing this, you’re taking out little insurance policies to protect yourself from possible substantial losses.


If you let a stock go down 50% from where you bought it, you must make 100% on the next stock just to break even.

Now, how often do you buy stocks that double in price?



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