First identify a stock that you think should have upside potential over the long-term. Typically, that's a company with strong fundamentals, good management, impressive profit margins and bullish price action.
Then, Cramer says check out the volatility; that's because this strategy works best with stocks that are somewhat vulnerable to swings in the broad market.
Once you've identified that stock, Cramer says scale into a position. "For example, if you want to own 1000 shares, then buy 250 shares four times over a period of weeks, or even months. That's your core position," Cramer said.
(If you're someone who only invests, you'd stop there and then do homework to determine at what levels you want to take profits.)
However, if you're comfortable trading, Cramer says "every time the stock jumps about 5 percent sell a fraction of your position, as much as a quarter. "You shave a little off to bring in some profits." As the stock advances, Cramer says continue to pare gains.
Conversely, when the stock declines, you would buy. As long as the decline wasn't due to a catalyst that calls the company's future prospects into question, begin to restore your position on a selloff. "When the stock trades down to the original level at which you first established the position, you should be 100 percent in," Cramer said.
That's trading around a core position.
Intrigued?
The "Mad Money" host said there are two caveats to this strategy. "I would never want to own less than a hundred shares total, because trading around a smaller position isn't going to make enough money to be worth the risk," said Cramer. Also the strategy works better with low priced stocks, simply because individual investors can usually afford to own more shares.
Again, trading isn't for everyone. There's absolutely nothing wrong with doing homework, establishing a position and then holding a stock as an investment for a year or more. However, if you feel comfortable with trading. Cramer says "you could generate lots of small gains that add up over time."