What is the 7% rule in investing?

What is the 7% rule in investing?

The 7% rule refers to a stop-loss strategy commonly used in position or swing trading. According to this rule, if a stock falls 7–8% below your purchase price, you should sell it immediately—no exceptions. Decoding the 3–5–7 Rule in Trading It revolves around three core principles: We chose to limit risk on individual trades to 3%, overall portfolio risk to 5%, and the profit-to-loss ratio to 7:1.