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Cramer: The secret to trading Facebook

The success of investing can often come down to timing. Jim Cramer warned investors that if they think short term, they can sometimes avoid pain, but it is more likely that they will miss out on opportunity.

Sometimes, a little short-term pain can put an investor into a position to rack up long-term gains.

"Stocks don't always get it right short term, and if you play the short-term game I think that you might not get it right, either," the "Mad Money" host said.

Cramer illustrated his point by reviewing Facebook, which has been under pressure after a Deutsche Bank research note said that it could disappoint when it reports earnings at the end of April.

Some may think that any stock that is up as much as Facebook should be sold on the rumors of a rocky quarter.

Mark Zuckerberg, founder and chief executive officer of Facebook Inc., speaks during the Facebook F8 Developers Conference in San Francisco, California.
Michael Short | Bloomberg | Getty Images
Mark Zuckerberg, founder and chief executive officer of Facebook Inc., speaks during the Facebook F8 Developers Conference in San Francisco, California.
"Stocks don't always get it right short-term, and if you play the short-term game I think that you might not get it right, either." -Jim Cramer

Cramer thinks the risk isn't worth it. The company is on the cutting edge of new devices, new methods of advertising and communications and dominates its industry.

"Believe me, I obsess about these issues all the time … Do you know how many times I have wanted to trade out of this sucker for fear that it would go down after it reported?" Cramer said.

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Despite a strong history of delivering better than expected results, Cramer noted that after the last eight quarters, Facebook's stock has closed down 50 percent of the time. In a week following its earnings report, shares traded lower 63 percent of the time.

With that pattern, many could find it tempting to sell Facebook.

The reason why Cramer believes in Facebook for the long term is because it has appreciated an average of 9 percent from one quarter to the next. Thus, the quick sell-off in the stock after reporting has proven to be a time to buy.

"The initial skepticism provides a rare buying opportunity, not a selling opportunity. Yes, renting and flipping Facebook has proven to be a sucker's game versus just flat out owning it," Cramer said.

Cramer has the same perspective about Amazon, which continues to deliver one step ahead of the retail cohort, even as retail sales are down big in April.

With the exception of cosmetics, Cramer thinks consumers have turned against going to the mall, which is why he considers Amazon to be a winner for the long haul.

"Better to think long term, better to own … than to sell them in order to sidestep a couple of bucks and a few hours of pain," Cramer said.

Disclosure: Cramer's charitable trust did own a position in Facebook at the time this story was published

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