GO
Loading...

Enter multiple symbols separated by commas

Cramer’s 4 point stock buying and selling system

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 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:

157293588
Petko Danov | E+ | Getty Images

Four

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, potentially 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.

Three

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.

Two

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

One

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. Cramer says pick your entry point and then wait for the downdraft to drives these buys to your preferred level.

----------------------------------------------------------
Read more from Mad Money with Jim Cramer
Cramer: Stocks reflect America's innovative spirit
Prepaid profits: Gift giving stock
Gauging the power of nat gas trade
----------------------------------------------------------

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 selloff with the aplomb of a pro.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

Cramer's New Book