How to Trade a Core Position

When it comes to actually trading stocks, not just investing in them, Cramer thinks it's essential to learn how to trade a core position. The key is to find a stock you believe is going higher over the long term, even if it gets tossed around by market volatility on the way. If you were just investing, you’d set up a position, buying the stock in increments, and that would be it.

But when you want to trade a core position, you have to be patient, Cramer said. If you own 300 shares of a $100 stock, every time the stock jumps three points, you’d sell fifty shares to bring in some profits. Then when something happens that knocks the stock down a peg or two – so long as it doesn’t hurt the fundamentals – you begin to buy it back incrementally. But you never want to own too much, just in case the stock gets hammered, or too little, in case there’s more upside on the way.

It might sound trivial and boring to trade this way – watching a stock move and just trimming or adding your position accordingly – but over time, the profits can add up.

Bottom Line: Trading around a core position is an exercise in delicacy and patience, but it’s a crucial method to Cramer’s madness.

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