Cramer’s 4 point stock buying and selling system

Tuesday, 18 Feb 2014 | 6:28 PM ET
Cramer: Selling everything is crazy
Thursday, 26 Dec 2013 | 6:15 PM ET
When chaos hits the markets, should you blast out of your stocks? Mad Money host Jim Cramer advises investors to take a breath before doing anything crazy.

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

The market is hard. Jim Cramer's system for identifying stocks to buy and sell is easy.

With the market often moving at the speed of light, too often individual investors miss their enter and exit points. And that's something Cramer hates to see.

To prevent that from happening to you Cramer has developed a system to address when to sell – and when to buy for that matter.

"I rate all of my stocks on a scale of one to four, the ones being the best buys, the fours being the sells. I swear by this rating system," Cramer said.

The "Mad Money" host believes his system is particularly valuable during times of extreme panic or extreme euphoria for that matter – because it demands discipline.

"It's a proven game plan that I have used for two decades and it has never steered me wrong," Cramer said.

Here's how it works:

Petko Danov | E+ | Getty Images


The fours are the stocks in your portfolio that are ready to be sold at current levels. These are particularly important stocks when the market turns south. "In the event of a pullback, these are stocks in which you have profits - even big profits. Don't give them all back; ring the register," Cramer said. These stocks are also stocks in which the fundamentals may have changed. "Again, blow it out. If you think it's going lower, even just short-term, sell some of them." These stocks can provide you with needed cash, which in turn can be deployed elsewhere in the market, in stocks that you think are just too cheap to pass up.


These stocks are almost ready to be sold. "Threes are stocks that you'd like to be higher before you sell, however, they can be sacrificed if other stocks seem too cheap to pass up and you want more cash," Cramer said.

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These are stocks that you want to buy, but not at current prices. A sell-off is a good time to visit these stocks. "I like to wait for a 5 to 10% pullback from the highs to pull the trigger.," Cramer said.


These are stocks that you want to buy at current levels. "They're top flight names," said Cramer. "You've done your homework and you're confident they're good." The Mad Money host believes investors should make their moves on 'ones' during a pullback – the nastier the better, he says. Cramer says pick your entry point and then wait for the downdraft to drives these buys to your preferred level.

Cramer says if you always rate your stocks on this scale and discipline yourself to act as outlined above, you'll not only profit but you'll navigate even the nastiest sell-off with the aplomb of a pro.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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