When we buy a stock as it breaks out, we cannot be absolutely sure this stock will be a winner.
This is where the 5 percent rule becomes important. If you buy a stock that is extended above its buy point by more than 5 percent (let's say 10 percent) then it retreats to its buy point, you will have to sell it to avoid breaking the 8 percent stop loss rule. Clearly, selling it here may be premature since the stock, in this example, has not broken down.
To learn more about selling rules please visit IBD University’s section on When to Sell Stocks