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Avoiding the Most Frequent Errors Investors Make

To help steer home gamers in the right direction, Cramer on Thursday went over some of the most frequent errors investors make.

When it comes to buying and selling stocks, the "Mad Money" host said timing is everything. If during a pullback, an investor has profits in a stock, Cramer recommends selling. He suggests selling shares if the fundamentals have changed, for example, or if the story is now going against you. After all, he said investors can always buy the stock back lower or when the story has turned around.

But Cramer said investors should never sell their entire position. Doing so would be "just plain stupid," he said.

(Slideshow—Cramer: Buy This, Not That)

"If you own too much stock and you want to lighten up in the midst of an incredibly bearish moment, you have to resist the urge to sell everything. That's bad timing," Cramer said. "I always tell you never to buy or sell all at once, because it's pure arrogance to assume that you can time your trades that well."

Instead selling everything, Cramer thinks investors should buy stocks that are selling off, even though they don't deserve to.

He also recommends buying and selling in increments, so if a particular stock goes down, the investor can buy more at a lower price. If it goes higher after having sold some, the investor can sell more to take advantage of the increased share price, he added. He said investors should apply this rule not only to individual stocks, but their whole portfolio.

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