Cramer's 'Mad Money' Recap: Tricks for Buying and Selling

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Editor's note: The following is a recap of a "Mad Money" episode that originally aired June 19, 2007.

Jim Cramer let viewers of his "Mad Money" TV show in on something special: five methods to his madness.

"I know this show is the craziest, most random and frankly most bizarre thing on television, but I also know that you won't find stock advice this good anywhere else," he said.

"How do I pick stocks? That's the question that everybody would love to know the answer to. Tonight you get a piece of that answer."

First, one of the easiest ways that he identifies potential Cramer names -- the stocks that might end up on the show -- is by watching the new-high list.

"Stocks on that illustrious list, the highest of the high, obviously have something going for them," Cramer said. "Either they're part of a major bull market, or the individual stocks themselves have serious momentum. No matter how they get there, most stocks on the new-high list keep going higher."

However, he doesn't simply pick names off that list. "That would be lazy and irresponsible," Cramer said. Instead, he waits for something to pull back from the new-high list.

"This gives you a good, lower-priced entry point in a stock that's probably going to rebound," he explained.

At the same time, market players should only buy stocks that have pulled back from the list if they are confident that these stocks will make a comeback. "You have to do all the same homework you'd ordinarily do before buying a stock," Cramer stressed.

"And the biggest caveat of all: When you're shopping for stocks that have pulled back from their highs, make sure they haven't pulled back for a good reason."