Cramer's 'Mad Money' Recap for July 18

On "Mad Money," Cramer said he takes inspiration from anywhere he can find it, even from "not-quite-classic '70s action films." Lesson No. 3 comes from Magnum Force, starring Clint Eastwood, he said. "In the immortal words of Clint, 'a man's got to know his own limitations.'"

Translating this to investing, Cramer explained that pros try not to invest in things they don't know or understand, while amateurs do this all the time.

"If you can't explain what a company does and how it makes its money without quoting some jargon that only an information technology expert would understand, then you shouldn't buy it," he advised viewers. "If you listen to the conference call and come away more confused than enlightened, how on earth are you supposed to know if it was a good call or a bad one?

"There will be plenty of businesses and plenty of stocks that you do understand. Buy them," Cramer said.

Fourth, while amateurs worry that they aren't making enough money, pros worry that they're making too much money, he went on. "Any schmo can make a ton of money all at once," Cramer said. "All you have to do is take on way too much risk, and that's the heart of the problem."

People need to worry about making too much money, not too little, because making too much money "is a sign that your portfolio is out of whack, that you're taking on way too much risk and that everything could fall apart for your investments at any moment," he said.

When Cramer was running his hedge fund, he was "never more afraid" than when he was making huge money, he said. Market players should look at what they own and if they're "killing the averages," if they're making more money than they ever dreamed of making, then they are doing something "very wrong."

"You need to take profits immediately, start selling like there's no tomorrow, otherwise you're setting yourself up for a huge fall," Cramer said.

Finally, "amateurs try to game quarterly earnings reports to catch a quick gain," whereas professionals "learn to start living and stop worrying about the quarterly report," he said.

People, Cramer said, should never buy a stock in anticipation of a quarter. In fact, they should "actively avoid" buying right before the quarter or during earnings season in general, he said. "It's just too hard.

"On this show we talk about investing in stocks, trading stocks, speculating on stocks, but there is one thing that we absolutely never do with stocks and that is gamble because when you gamble, the house always wins," Cramer said. "Trying to guess whether or not a stock will go higher after it reports earnings -- that's gambling."

He's seen so many examples of stocks going down off of great quarters that it's taught him that people absolutely should not "game the quarterly report," he said.

"You shouldn't be making snap decisions about stocks, you should be making well-considered decisions that take a lot longer because that's how you make the... mad money," Cramer said. "It's how you stay mad for life."

Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.

For more of Cramer's insights during the Lightning Round, click here.