Mad Money

Cramer: Beat the 'Flash Boys'

Cramer on high-frequency trading
VIDEO11:0211:02
Cramer on high-frequency trading

(Click for video linked to a searchable transcript of this Mad Money segment)

In his new book "Flash Boys," author Michael Lewis alleges that the market is effectively rigged.

That is, Lewis says high frequency traders, or so-called "Flash Boys," are able to front-run orders, which means they are able to buy in front of you and sell back to you, when you want to buy.

Jim Cramer doesn't dispute it. But if you want to profit from the market, Cramer says you have to make your peace with it, even if it rankles you as much as it rankles him.

Instead, Cramer believes that even if big investors are engaging in high frequency trading, individual investors can generate better results. That's right, he says you can tip the scales in your favor.

Traders work the floor of the New York Stock Exchange.
Getty Images

The secret, Cramer says, lies with homework, in which you identify investable long-term themes and then actively do research to confirm that the theme remains viable.

"I'm not interested in competing for pennies a trade, I want big gains and the only way to get them is with powerful, longer-term themes," Cramer said, noting that high frequency doesn't offer that.

And if you don't think you can outperform your professional counterparts, Cramer says thinks again.

"Lots of pros are lazy," the "Mad Money" host has said time and again.

That is, lots of pros make decisions based on factors other than fundamentals, which Cramer believes ultimately drive the market.

But if you do the work, and hold a diversified portfolio made up of shares of between 5 to 10 companies that have attractive growth prospects, substantial market share and strong profit margins, Cramer believes your stocks will advance substantially, over time.

Period.

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"At the end of the day, fundamentals are the only reason that a stock will command a premium over the long-term," Cramer said. "If you keep up with this kind information, I promise that you will know more about a stock than many of the professionals do... and ultimately outperform them."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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