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Editor's note: Jim Cramer's book, Real Money: Sane Investing in an Insane World, includes Cramer's "Ten Commandments of Trading", which we've reprinted below. For more about the new book and to order it, click here. To learn his "Twenty-Five Rules of Investing", click here.
No Sale? No Profit
Commandment 6
The game's tough right now. So tough that you have to be thinking, "It's just not worth it. When 50,000 people close accounts at Ameritrade (AMTD - news - Cramer's Take) in a quarter, you have to know that you aren't suffering your misery all by your lonesome.
It's always that way when you are rooting for bad news. It's always that way when you are playing defense.
This is one of those moments when people are looking at some rather huge gains in sectors that may be giving way and they don't want to ring the register.
All of you in that situation, I want you to remember one of my most important Trading Commandments:
You don't have a profit until you sell.
The way this market looks right now, if you have a big gain in one of these heavy cyclical stocks, you need to think about whether that gain is going to get wiped out or not.
Let's take Phelps Dodge (PD - news - Cramer's Take). I genuinely feel that those who bought Phelps Dodge in the $60s and $70s believe that they are so far away from where they bought the stock that they have the gain. You do not have the gain until you take it. And some needs to be taken.
If we truly are in rotational hell — which I think we are, by the way — you have got to take some of the cyclical winnings off the table, you just have to. Right now, right here.
Stop thinking that you have it in the bank. Instead, put it in the bank. And accept the fact that the offense has made about all it can here and you have to be defensive to play the next move correctly.
Jim Cramer is a director and co-founder 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 at 6 p.m. & 11p.m. ET weeknights on CNBC. Click here to order any of Jim Cramer’s books including his latest endeavor Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.
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