The Dangers of Emotional Trading

Being overly negative really can hurt on days like today. When I saw the jobs print, I just hated it. But that was too emotional. It was too emotional, because Goldman Sachs had told you the day before pretty much what it was going to be, so if you existed in a vacuum and don't pay attention to widely reported stories like that, you got slammed.

One of the reasons why I try to stay agnostic is to be a credible force on days like today. But I had "hoped" that Goldman Sachs was wrong, and that turned out to be a silly bet.

When it was in line with Goldman, all stocks got hammered, and that should have been a clarion call to me right at that moment to suggest aggressive buying instead of saying "watch Apple (AAPL - commentary - Trade Now)," because when you have an overly discounted number, it is going to produce opportunities either way, especially when you have been down for a while.

As I wrote many times today, I can't be as bullish as I was, because my thesis requires some job growth, and I have to adopt a new thesis. But if that thesis means I go from being bullish to bearish and not something in between, again, that's emotions talking.

We know that bottoms occur in stages. Bottoms on economic strength start with a turn in the Freeport-McMoRan (FCX - commentary - Trade Now) and Caterpillar (CAT - commentary - Trade Now) and Deere (DE - commentary - Trade Now) crowd. The Fluor (FLR - commentary - Trade Now) and Foster Wheeler (FWLT - commentary - Trade Now) and Jacobs Engineering (JEC - commentary - Trade Now) crowd.

Bottoms in weakness start with whoever just had good things said about them if they are from the grocery counter or the medicine chest. Just like always: Pepsi (PEP - commentary - Trade Now), General Foods (GIS - commentary - Trade Now), Coca-Cola (KO - commentary - Trade Now), Abbott Laboratories (ABT - commentary - Trade Now).

To emotionalize it is to fall prey to all the doctrine of people who simply can't accept that there are a lot of stocks that go up on horrid news. They may not dominate the averages. But they can make you money.

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Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

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