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.
Don't Trade Off Only the Headlines
Commandment 9
If I didn't know any better, I would think that headlines are written to pick off errant traders who don't know enough. Watch tonight, watch when Intel (INTC - news) reports. I guarantee you that whatever headline is written for the competing wire services, it won't tell you what to do. If anything, it will throw you off the scent.
That's because the headline writer's job is antithetical to the process of investing and trading. You trade when you have knowledge of outlook, but the outlook comes out after the raw number, which isn't enough to trade on.
That's why I always say (and why my ninth Commandment of Trading is):
Don't trade headlines.
Wait for the story. Believe me, you will rarely, if ever, make money if you do nothing but react to the headline.
How bad can it be? Consider Apple (AAPL - news). I think that, looking back on the headlines after that company reported, you most definitely would have taken stock rather than sold it, because the headline was written with insufficient information.
Wait for the story. Don't trade the headline. Resist the quick trigger. You will do much better and generate far more winning trades this way.
Random musings: Don't forget, I'll be signing copies of my new book, Jim Cramer's Real Money, at Borders bookstore this Thursday, April 21, at noon. I want to see you in downtown New York, at 100 Broadway — right around the corner from Wall Street. Should be terrific!
At the time of publication, Cramer was long Intel.
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.
TheStreet.com has a revenue-sharing relationship with Traders' Library under which it receives a portion of the revenue from Traders' Library purchases by customers directed there from TheStreet.com.
Connect with TheStreet