Real bottoms don’t happen all that often, Cramer said, but investors can make a significant amount of money if they call one. Admittedly, the strategy is more art than science, but the Mad Money host said it was crucial for viewers to know how it was done.
"Bottoms are great because they represent fantastic buying opportunities with not very much risk," Cramer said, "as long as your bottom call is right."
So how do you call one? Watch for these three signs: investor sentiment is so bad it makes the front page of the newspaper (the actual front page, not the business section front page); mutual funds pull out of the market en masse; and some catalyst, like the subprime lending crisis, hits that has a widespread effect on the market.
Beyond that, though, investors should know that there are two kinds of bottoms, one that happens over a short period of time and another that's driven by massive capitulation. The first is much more common, Cramer said, and it usually plays out as stocks find their nadir in thirds, sector by sector, over a few days, not weeks. The second takes place when the last remaining bulls lose all hope of a rebound and dump their holdings. This sets off what Cramer called a "crescendo sell-off," and it's marked by high volume and sinking share prices.
"You back up the truck and you start buying," Cramer said, during a crescendo bottom.
One thing that investors should never do is rely solely on technical analysis. Even the best technicians are often wrong because the chart is never enough. The fundamentals must be considered, too.
Cramer's bottom line? Don't let the three signs of a coming bottom scare you. Don't let them force you out of the market.
"You want to be the only guy who knows it," he said, "so that you can buy up stocks for next to nothing and then relax as they start to rise afterwards."
Call Cramer: 1-800-743-CNBC
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