Per Sheldon Brown's bike bible, wrap the chain around the biggest front/rear gears w/o derailleur, FInd the minimum length to do that and add a link. Because of the way the links are staggered with a big and small end, it;s usually two links,
Done the above way, when threaded thru the derailleur, its arm starts going horizontal on the biggest gears per Stompandgo's post. Department store bikes never go that high so it's OK to add a third link in my opinion..