How to Make Money With Jim Cramer

I am not a licensed money manager or securities dealer; I am what Cramer calls a “Home Gamer”. Since my return from Iraq seven months ago, I have been earning my living trading stocks. I can not say I have gotten rich, but I have in fact been making a living from a relatively small amount of money invested (< 30 K). I gather information for my trades from many sources including Investors Business Daily, along with watching his show. It is one of the many useful tools I have used to develop my own trading rules; which, when I have the discipline to follow them, I usually make some very good returns while minimizing my risk of loss.

Jim Cramer is the Host of CNBC’s Mad Money program, weeknights at 6:00 and 11:00 pm. Within the Wall Street world he is a controversial figure as he violates the “Prime Directive” of Money Mangers everywhere; by telling individual investors to take control of their investing. He does not advocate the Buy and Hold philosophy that has been the mantra of individual investors for over 20 years. He instead advocates Buy and Do your Homework and tells you how to do that both in his books and on his show.

He gives the individual investors rules to follow when evaluating both the purchase and the sale of stocks based on “fundamental analysis” of the company and stock at hand. He does periodically highlight technical analysis that either confirms or calls to question the fundamentals of the stocks under discussion. His insights are based on having previously managed a hedge fund for Goldman Sachs, and give the viewer and readers valuable tools to manage their stocks.

The key element in making money with Jim is to use both his books and the TV show in concert with each other. The best time to buy a stock he recommends on his show is rarely the next day as after hours traders will often times drive the price up to enter a short position (which will make money for them when the price falls). He highlights this in his book “Mad Money watch TV, Get Rich”.

He is also one of the few talking heads or Financial Gurus that steps up and tells you when he is both right and wrong about a stock or a trade. He uses this to give you ten lessons from bad calls and ten lessons from good calls in the Mad Money Book. His straightforward talk about the financial system and how it works is both a breath of fresh air and very useful tool.

The key element here is that you can make money by sticking with Cramer but you really do have to do the homework, and know the rules of both trading and investment. This is another of Jim Cramers Rules never turn an investment into a trade, or a trade into an investment. They are two different things. His show is in fact oriented to investors, but the insight given is particularly useful for traders as well. Like I said know and develop your own rules for both.

Much controversy has also been generated by Mr Cramer’s comments in March about a Bull Market return. Many are calling the seven month rise of the markets a Bear Trap but if you follow his rules, you can make a traders profit in this cyclical Bull Run weather it’s the start of a New Bull market or a Bull Run in a secular Bear market, Stocks going higher offer profits if you have the tolerance for risk. Risk tolerance is well addressed in his books and on The Mad Money Show.

I will leave you with another of his philosophies and that is that Bulls make money, Bears make money, Pigs get slaughtered. Taking profits for the investor is one of the hardest psychological hurdles to cross. It is a philosophy that again comes into direct conflict with the buy and hold money managers that want to manage your money through mutual funds and hedge funds etc. Understanding that conflict is in itself a useful tool and following his advice is an even better one; especially in these times of low cost on line trading.

Disclosure I am not nor have not, been compensated by any entity for these comments. I am not a paid spokesman for Jim Creamer or any entity mentioned here.