CUT LOSS vs RSI

One of the most important disciplines in trading is to cut your loss, thereby you preserve cash for future trading. This is a RULE. The most famous adage for cutting loss is "CUT YOUR LOSSES AND LET THE PROFITS RUN".This is true, without a shadow of a doubt. But when a stock is trending sideways and the fundamentals are showing positive performance of a company, the above saying must be taken with a different approach.

If the Ratios are good you must collect
When you analyse the fundamentals, and they are good, the question is to know whether the price is safe to go into an entry position. This could be identified by knowing whether stock is oversold or overbought. RSI or the relative strength Index is one of the indicators that you can use to figure this out. If the RSI is on the oversold region then you can decide entering your position, and keep collecting. The question is what you should do if the stock keeps falling even after you enter on the oversold region. This happens most of the time, but your decision was made not just because of the RSI, instead you only used it to enter a fundamentally positive company.

Then when should you cut your loss?
You cut your loss on an entry decision as above, is when the fundamentals become negative. Based on this, does the Rule on CUT LOSS undermined? certainly not. Instead you define the true meaning of cut loss. That is cut loss is not something to be decided just by looking at a chart, but it has a broader meaning.