- "These sellers ended up fleeing at the worst possible moment ... I don't want you to repeat their mistakes, so let's go over everything these dopes did wrong," CNBC's Jim Cramer says.
- "That's the whole point of having rules, so you can fall back on them when you're too overwhelmed with emotion to think rationally," the "Mad Money" host says.
CNBC's Jim Cramer on Tuesday called out investors that he says broke a handful of rules in after-hour trading.
The "Mad Money" host shined a light on big tech stocks that were sold off after Monday's 4 p.m. market close by as much as $10 under their 9:30 a.m. opening share prices the next day.
"These sellers ended up fleeing at the worst possible moment. They violated every rule in the book," Cramer said. "I don't want you to repeat their mistakes, so let's go over everything these dopes did wrong."
Apple, he noted, traded for $186 in the after market though it opened Tuesday's session above $196. Microsoft sold for $126 and Facebook sold in the mid-$170s the evening prior, but their stocks started Tuesday at $133.80 and $183.69, respectively, he added.
Those moves followed the worst trading day of 2019 when Wall Street reacted to reignited tensions on the U.S.-China trade front. The five most valuable U.S. companies in Microsoft, Apple, Amazon, Alphabet and Facebook all lost a sum of $162 billion in value, CNBC reported.
Cramer spent days prior telling viewers not to panic, wait and see how China would respond to President Donald Trump's threat to tack on new tariffs and prepare to start new positions in the market. The U.S. called China a currency manipulator for letting the yuan drop below a key level before the country's central bank increased the yuan's strength on Tuesday.
"These things wouldn't [have] keep happening if investors would simply stick to disciplines," the host said. "That's the whole point of having rules, so you can fall back on them when you're too overwhelmed with emotion to think rationally."
1. Panic is not a strategy
The U.S. Treasury Department on Monday declared China a currency manipulator after the country's government let the yuan slip to 7 against the U.S. dollar for the first time in more than a decade. Cramer said the sellers made a big deal out of nothing.
"There was nothing much to the currency manipulator designation," he said. "It was pure panic and it made no sense, whatsoever."
2. There is always a better time to sell than into the maelstrom
"I know, because I've done it myself. You can read all about my idiocy in 'Confessions of a Street Addict,'" the host said. "If these bozos had just waited until the morning, they could've easily sold at much higher prices. All they had to do was nothing."
3. Stay away from after-hours trading
Investors can buy and sell equities in the after market via electronic exchanges between 4 p.m. and 8 p.m. ET. Cramer often warns against trading stocks in the after hours, particularly through a market order, because that's where professional traders often lurk to short sell a stock.
Short selling is borrowing and selling a stock in hopes to buy it back at a lower price to turn a profit. Market orders opens the door for a broker to buy or sell a client's stock for any price.
"After-hours trading is like the wild west, except there's no sheriff," Cramer said. "There's a lot of money to be made in algorithmic trading, but it can also produce some incredibly idiotic moves, like it did last night."
4. Check your emotions at the door
Traders that dislike Trump are "letting their seething resentment get the best of them," Cramer said.
"If you want to be a good investor, you need to leave your political opinions at the door, as I try to do," he said. "Just because you hate the guy, that doesn't mean he's gonna wreck the stock market."
5. Don't sell all at once
Cramer recommends that viewers build or reduce positions incrementally.
"This is corollary of my view that you don't buy all at once," Cramer said.
WATCH: Cramer breaks down the rules investors should never break
Disclosure: Cramer's charitable trust owns shares of Facebook, Amazon, Microsoft, Alphabet and Apple.
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