Luckily, during the recent downturn, I didn't rigorously stick to my 'sell if drop more 5%' rule. I did sell my HSBC and Lloyds bank, but not Apple or Yahoo. Thank goodness. Apple and Yahoo are up as follows;

APPLE - AAPL           +16.43%
YAHOO - YHOO        +11.22%

I guess my friend was right. You need to apply the 5% rules with some thought, according to the environment and the stock.