This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Cramer's 'Mad Money' Recap: Rally Rules

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.


NEW YORK ( TheStreet) -- There's nothing worse than watching the averages roar higher while your portfolio just sits there, Jim Cramer told "Mad Money" viewers as he devoted his entire show to teaching investors how to best take advantage of short-term rallies.

Cramer said the most important lesson in dealing with big market moves is preparing for the future and not letting great opportunities to sell pass you by. He said just as investors can't give in to despair when the market plunges, they also can't get blinded by euphoria when things are going well. "You don't actually have a profit until you sell something," Cramer reminded viewers. You aren't making money until you "ring the register." That's why selling into strength is always the best policy.

There's nothing wrong with feeling good about a rally, as long as it doesn't lead to complacency -- the enemy of every investor. You can be thrilled about your portfolio's performance, said Cramer, but don't forget that you've also been given a chance to sell at great prices. Remember the goal of investing: buy low and sell high.

Take a Hard Look

Cramer's next rule for investors was to always scrutinize your portfolio hard during big market rallies. The only time investors need to be tougher on their portfolios is during brutal market declines.

Cramer said it's only natural to fall in love with a stock that's making you a lot of money. But in the end, you can love your spouse, you can love your kids, you can love your dog and maybe even your job, but you should never love a piece of paper, especially if its value is heading higher. When a stock is making you money, you tend to love it more, but actually you should be liking it less. The more expensive it gets, the riskier it gets and the more likely it is to fall.

That's why investors should re-rank all of the stocks in their portfolios during big rallies, taking into account the risk/reward they now offer. Stocks you bought low and still represent great value? They should be ranked highest. Those with big gains should be ranked progressively lower. Emotionally, this may seem counter-intuitive, said Cramer, but in a rally where everyone is buying like crazy, the smart money should be ringing the register on their biggest gains.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs