Cramer's 'Mad Money' Recap: Tools of Cramer's Trade

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(Editor's note: The following is a recap of a "Mad Money" episode that originally aired June 25, 2007.)

Jim Cramer, on Friday's "Mad Money" TV show, filled viewers in on more methods to his madness -- all the little tricks and tools he uses to pick stocks, to know when to buy and sell, and generally to be a great investor.

He started off by giving people a "rainy day" tip for when the market is having a really bad, down day. "What you need to be looking for after a down day is buying opportunities," Cramer said. "There is no better opportunity to buy than when you find a stock that's been upgraded by some analyst on a down day."

Usually when a stock gets upgraded, it jumps higher immediately, he said. But not when that upgrade comes out on a bad day for the market. "On those days, a stock that gets upgraded isn't going higher. In fact, there's a good chance it will go lower depending on how awful the action is," Cramer said.

"And there is your opportunity -- the day after the selloff, when things have calmed down and are less negative," he said.

Another method to his madness, Cramer said, has to do with how he determines if an individual stock is truly undervalued. "People like to throw around terms like over- or undervalued," but Cramer said he has his own rule of thumb for figuring it out.

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