timmy and i are headed to madison square garden. season starts tonight. >> go rangers. i'm melissa lee. thanks for watching. see you tomorrow at 5:00 for more "fast money." meanwhile, "mad money" with jim cramer starts right now. "mad money" with jim cramer starts right now. my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now. hey, i'm cramer. welcome to "mad money." welcome to cramerica people want to make you friends, i'm trying to make you money my job is not just educate you but to teach you so call me and tweet me @jimcramer. tonight i'm letting you in on something real big. the method of my madness. come on i know this is the craziest most random and bringly bizarre thing on not just

business tv but television in general. i mean think about it, a one-man show about business but i also know that you won't find investing advise this good anywhere else, you know that too, or else you wouldn't be watching. i'm not sure you're one of those people who tune in to see if the night is the tonight i actually do go off the rails which after multiple years of airing is always a possibility on any given night. sorry, guys there's a tape delay. keep wishing. bound to happen though i do my best so it doesn't this. show is all about the method or methods to break from strictly quoting the bard to my madness. how do i pick stocks? what gets on this show? you always ask me that. why do i tell you that some stocks are worth buying now or on a dip or instead of like, hey, you know what, tomorrow that's the question that everybody would like to know. so tonight i'm going to give you pieces of the answer. let's get rolling. one of the easiest ways i identify potential cramer names for "mad money," the stocks that could but won't always necessarily end up on show is by watching my favorite list from when i was frankly a little boy

in fifth grade. i used to look at the new high list. i thought it was the guys hitting better nan .300 in baseball, stocks on that illustrious list highest of the high have something going for them and especially true when the market is in bad shape as only the best of the best can hit new highs when the market is falling apart. when does it tell you when a stock hits a new high either it's part of a genuine bull market or the company itself is in for serious earnings or sales momentum, or maybe its sector does which so often responsible for a stock's increase. no matter how they get there, many stocks in the new high list often keep going higher because it's really a list of "a" students worth investing in. "a" students tend to repeat themselves in the process every quarter, just like the really smart kids in school. and in a great bull market like we've had from the bottom in 2009 and any market by the way, that doubles from the bottom has to be considered a great bull market. >> hallelujah. >> even as i know so much resist such labels we saw this new

high list phenomenon over and over again, the same stock would hit new high after new high after new high and following them was a great way to make money, even as the bears claimed endlessly that the bull market was false and couldn't be trusted. listening to the bears caused you to miss out on one of the greatest rallies in history. obviously the rally since the bottom is more like the exception than rule over time all years that i've followed the market, but generally speaking things have worked with well will continue to work because these stocks typically represent companies that are best of breed. always remember that phrase because it's integral to "mad money." i'm not saying that just so you can chase stocks hitting new highs because they will keep going higher. that's the ultimate true bozo ish ish. looking at biggest winners of the present is a pretty good place to try to figure out the future. let this list do it for you.

it's already been scrutinized and scrubbed. that's the thing about the market. it's not always that hard to play once you understand that there's often more continuity than change. things pretty much going -- keep going the way they are going, until something major shifts and then you do have to alter course. those courses -- course changes can be pretty radical though and that's why you always have to be re-evaluating your yids and should never dig in your heels when the facts change something we emphasize over and over here and also infuses my columns in "real money" and all my books i've written save my autobiography, "confession avs street addict" which is more of a score-settling tone, settling scores with myself. hey, it isn't called "mad money" for nothing. but you know what? when you're looking for stocks to invest in hunting for bull market like i always do here looking at the new high list is a terrific way to begin. i don't pluck names off the high list because i think, hey, these stocks have gone up so they will keep going up. that's a little lazy and irresponsible.

i'm many things, a lot of them negative but lazy and irresponsible, i don't know. anyone who sees my insane tweets at five of 4:00 @jimcramer knows, yes, that's between, hey, is that someone else would tweeting for you? who else would get up that early? you can't do that and then of course, the obligatory do you ever sleep? i mean, well no. i mean not for any long stretch. i play the staple standards of rigor to this show i used in my old hedge fund i rarely buy stocks trading off the new high list. i'll talk about those later in the show but what i do like to do hunting for stocks and what you do need to do is wait for the fabled pullback from the new high list because that's the best place to put money. the pullback and there i'm thinking about something that could be 2% 3% or preferably 5% gives you a lower price entry on something that's on that list. remember, i'm not telling you to chase momentum. you should always be conscious of price, and, therefore, try to buy on weakness, just like you want to sell into strength. most people can't pull the

tryinger when the stock is going down because they think something is wrong. if it's on the new high list coming down, that would be your man. i'm throwing the caveats in because you don't want you to look at the new high list as a shopping list, that's a mistake. it's a jumping off point, albeit a very important one for those trying to get started. poring over the new high list is a fabulous way to identify potential and i stress that word potential. buy stocks from the new high lie if you're confident they will make a comeback from substantive reasons having nothing to do with the market. have you to do all the same homework you ordinarily do before buying a stock. you don't get a pass there. you absolutely must have conviction, even if it's a cynical conviction that the stock is going higher and do i that for a lot of the ipos that i go crazy about where i'm really saying listening, cynically i know the buyers go crazy. me i accept they are pieces of paper. you know the big boys can't resist growth stocks and they will always come to support in down days. the biggest caveat of all buying stocks pulled back from the new

highs, make sheer it isn't for a reason that it isn't extraneous for a reason. don't buy a home builder that's down because interest rates are up. hey, biby the way, don't buy a big independent oil stock when oil goes down for three straight days because that probably doesn't belong on the new high list anymore. i always like to say you're looking for a stock that has bristol meyers like strength because almost nothing has to do with bristol meyers. be sure you're dealing with a momentarily damaged stock rather than one that's going down, down, down. how do you tell the difference in the fundamentals haven't changed, the stock probably hasn't fallen from grace, pull back largely for mechanical reasons, profit-taking or panic in the market and more than ever thanks to the fact that stocks with traded like commodities causing huge selloffs that make sense or anything and double or triple related etfs more powerful than the stocks themselves, you see the stocks of good companies pull back from their highs for nothing that happened to do at the company, nothing to do with the company

or the strength of the underlying businesses. those are the buys. >> buy, buy, buy. >> but if the fundamental picture changes, whatever made the strong attractive goes away then that stock is no longer a candidate. >> sell, sell sell? the story has to be intact or this method will let you down. while this isn't a hard and fast rule i like stocks pulled back just enough but not too much. 8% is the historical optimal level of a pullback that i've really made a lot of money. in less than, that you know what, you're going to be early for some of them. more than that and maybe something is indeed wrong with the stock. you just don't know. 3, 5 8, all important levels. that 8% level, man, i've made a killing when i buy them down 8. bottom line, that's the first med off of cramer's madness, watch for new stocks off the new high list. some of my best picks out of this process, my getting to work shopping list. hopefully some of yours can, too. why don't we start with arzella

in ohio. hi. >> caller: hi jim and boo-yah to you. >> boo-yahoria to you right bam. >> caller: i'm trying to get a better insight on mutual funds and "a.i." would like to know are they a great way to diversify. >> got to tell you here's the problem. a lot of people have 401(k)s where you need mutual funds and you can't pick individual stocks and for that they are and what i like to do is have 20% international, 50 -- i'm a little bit older, 50% growth. the rest will be kind of a balanced situation, maybe a fund that has some bonds. you have to depend on your outlook and your age, but, yes, mutual funds are fine. try to look at some of the performance records in morning star that's what i use. glen in louisiana. glen? >> caller: how you doing, my man? >> what's up? >> caller: nothing. i'm asking you today for some simple advice. i'm 65. i'm retired, and i'm needing to keep my portfolio directed towards yield and a little bit of growth. >> okay. >> caller: i'm fairly

diversified, but i'm -- i'm kind of afraid of what the market's doing in and out, in and out. >> mm-hmm. >> caller: and so i'm trying to be and i need your advice on how to be more diversified and less risk. >> i think the telecos, telephone utility companies, traditional electrical generation companies, the iyr stocks yielding more than 4% a lot of the real estate investment trusts and then the master limited partnerships not all in i.r.a. track considerations burks those are the areas i look and they have been quite, quite, let's just say, consistent in generating good returns in good and bad times. stuart in florida. stuart? >> caller: jim what's the best time to use stop orders after you purchase a position? >> no we're not going to do that because if we're going to trade actively we have to pay attention to it and if we're not going to trade we're going to invest. we don't need stop orders what could happen the market could be done 10% in a flash day.

you'll have sold the stock and then it bounces right back and you say what the heck happened? we don't play it that way. we invest on "mad money." we're not traders. we invest. all right. there's a method to this madness and tonight i'm reviewing it all. first method look for stocks pulled back from new highs especially because of a broader market selloff having nothing to do with the individual stock that you want to pull the trigger on. stay with cramer. don't miss a second of "mad money." follow @jimcramer on twitter. have a question tweet kramer #madtweets. send jim an e-mail to madmoney@cnbc.com or give us a call at 1-800-742-cnbc. miss something? head to madmoney.cnbc.com.

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welcome back to tonight's methods to madness special where i'm reviewing some of my best tricks for buying and selling stocks truly timeless investing wisdom for the ages i hope. next up how do you find stocks that are great buys? earlier i was talking about picking off stocks that are

pucked back from the new high list because you get a cheaper entry point in a stock that's been a proven winner. i said you didn't necessarily want to buy names right off the new high list pause you're paying too much for them. you can usually get a better deal if you're patient and wait for weakness, down 5% 7% given how volatile and downright crazy the market has become there's very few occasions where buying a stock right off the new high list or that close to it is justified. sometimes a stock is so high you've got to buy it whenever you can, as soon as you can, because it may not be going lower any time soon. you won't find these often, but when you find them you have to remember not to buy all at once. if you want to buy 100 shares of stock, you think it's got so much mojo it won't get pulled back from the high go ahead and buy 25 shares. worst thing that happens goes higher, you don't buy more and you grab a quick profit and find another stock. believe me, there's always another stock to find. now i've got an exception where it's okay to buy a stock right around its high. if you see insiders buying the stock when stocks are up a lot

already, i'm going to give you a total. >> buy, buy, buy. >> green light. rare to see happen but if my experience it's rare still that this medal of picking stocks doesn't work out. see, i love it when insiders buy after a decent run because that's a great sign of competence that they think the run is just beginning or there's a big runway ahead and they are sure it's long lasting. you can't flip a stock immediately if you're an inside buyer. you have to wait six month. government takes await gain otherwise. it's the law. these people are seeing things they like that won't disappear in six months time. normally insider buying ranges from being meaningless to a -- to a small but on its own insufficient reason to buy a stock. a lot of times you'll catch insiders buying stock because they want to give the impression of confidence and create an illusion they are doing better than they are. insiders aren't stupid. known if they are seen buying their own stocks even small amounts, the market will smile upon them so they play the system. hey, that's fair but it means we ignore most tiny insider

buying because it could be kind of flimflam, what a word. used to call it painting the tape, kind of makes it look better than it is. that said, when you get truly colossal insider buying even if it's not at the high you might want to take another look at the stock in question because it's pretty powerful endorsement when the insiders buy a whole lot of stock. really the volume of the insider buying that declares its sincerity, but we're only focusing on one sort of insider buying right now. stocks that are running and aren't perceived as being historically cheap or low dollar plays. nothing more arrogant and more telling than when an insider backs up the truck for his own stock when it's been rolling along at a pretty good clip. they are saying yeah we know we rock. our stock's been in fuego and we're so darn confident it will keep going higher that we'll buy shares hand over fist right now. not waiting for a pullback no. buying right here. arrogant and bankable hubris. corporate insiders aren't fools are note and exceptions

occupying the "mad money" wall of shame. if they are buying, they probably do know something. not everyone deserves the benefit of the doubt and after the financial crisis and market meltdown in 2008 i know a lot of people think that all ceos and executives for that matter are a bunch of crooks frauds. >> boo. >> and now banks, especially those who god burned only the only fannie mae or lehman brothers but that's the wrong lesson to draw from the crash. healthy skepticism is one thing, a total unwillingness to believe in anything positive is something else entirely. if you're going to own stocks you need to be willing to extend some measure of trust to the people who run the companies that you own shares of. what else could be going on to spur buying? had a massive amount of consolidation and a host of industries as of late. seen it in airlines rental cars, food telecommunications entertainment, perhaps these executives are buying stock because they hear the footsteps. maybe they have been contacted by some other company and turned that company down.

spurred overtures happen all the time and if executives think they may be next could be a healthy and honest reason to buy. of course, they have to disclose anything that's a serious bid, but a lot of times you just get a phone call say no bye. then they do that because the company is worth more than they thought. maybe they think the company could be broken up like the old tyco fortune brands you could net. maybe you see the ability to create value and just want in on it themselves or maybe the stock has run a bit but they don't think the run is over because they recognize how much better the company will be when's divvied up. for us buying after big runs can be a bit reckless and lazy. most investors are smart enough to wait for a pullback before they pull the trigger. there's nothing more bullish than not thinking there's a pullback. sure i want to wait for a pullback after they thought but that's the best of all possible worlds and you don't get the best of all possible worlds. the insider buying stock buying on on a solid run, you probably want to be buying too.

bob in new york. bob. >> caller: steeler boo-yah to you. >> steelers from new york. what's up? >> caller: i have a question about interest rates. when the fed raises interest rates, good companies with attractive dividend yields and growth prospects suddenly rapidly go out of favor. can you add some clarity to why. >> well because people extrapolate there, bob. once they start to see rates go up they fear they will go up for a while. if that's the case they want to get out of what they perceive as being a risky yield which is a stock yield and go into what's a certainty which is a bond yield so it's all relative basis. rick in california. rick? >> caller: boo-yah, jim. >> boo-yah, jim. >> caller: how do i add to a position if my stock hasn't gone down to the average list price? >> no, you can't. i would say the vast majority not just a few times, not just the majority but the vast majority of times we pay up above our basis, well i've got to tell >> you sell, sell sell. >> you've got the picture. remember, here's another med

offered my madness, when you see insider buying on a stock that's already had a big run, think to yourself i might want to be buying here too. after the break i'll try to make you even more money. >> jim cramer you're one of my heros. >> i look forward to your show every week night. >> thank you so much for helping beginning investors like me. >> when you talk about the markets, i just believe that you're spot on. >> oh, i love it. thank you so much. every night we watch you. i have learned and earned.

you're in luck because you called cramer on a good night. i'm not going home to sip that cheap stock on my dirty linoleum floor. by the way, i've got to apologize to doers who i once suggested that was the linoleum scope of of chop good stuff, especially the 18-year-old boutique. had any of the 18-year-old jamison? don't waste that on the dirty linoleum floor. tonight i'm in a great mood which is me at my absolute best. i'm pretty down productive when i'm in high gear so naked, so ref that had i'm revealing many of my secrets, methods to my madness. pull out your pencil and paper.

haven't used that line in a while. start jotting things down because i'm going to tell you something that could be incredibly useful. i'm giving you some of the best ways to pick stocks. i'm teaching you how to invest and trade like cramer. if not to be like me because i've got some kind of like emotional things cooking here but at least emulate me, i mean you know. so far i've given away two of my precious secrets, two of the tools that i used in high hedge fund and still use in my charitable trust where i play with an open handle and allow all subscribeser to see the open trades. i look for stocks pulled back from the new high list. not a reason to buy in itself but a great place to look for potential buys, and i hike to buy stocks that have had big runs and yet still have substantial insider buy because it says the people running company really believe their stock has legs and if they believe there could be a good reason for us to believe, too. but, again this alone not enough to recommend a stock. still need to do the homework check fundamentals to make sure you like the story behind the company before you dive in and buy. what i'm techg you tonight are

really what i call tells. that's right, they are tells. they are signals that a stock might be worth owning that it's worth your time and every to go through the often boring process of reading through the conference call transcripts and quarterly files, thousands of stocks out there and any ones we can use to narrow down the ones that might be attractive is a method worth high. while i don't usually use insider buying to determine whether or not a stock has it going or not one other scenario where insider buying makes for an incredibly bullish tell and that's when a stock has a heavy short position meaning a lot of people out there have borrowed shares, sold those shares and are now waiting for stock to go lower before they buy back the shares return them to the bank. they bore ode them from and collected them. they sold it first and the price they bought the stock back later. hopefully they sold it high and bought it low. you can think of shorting like regular investing but it's in reverse. we try to buy low and sell high. shorts just turn that around. sell high and try to buy low. when a stock has a lot of shorts in it that means a lot of people

have serious conviction that the stock is only going lower. in fact it takes more conviction to short a stock than it does to go long. wall street speaks for buying stocks because when your shorts is a potential downside sin fin it. when you're long a stock, stocks lose at zero. when you short a stock there's no lid. other important note about short sellers, a lot of them and a stock all of a sudden gets good news we get what is called a short squeeze and it sounds exactly like what it is. in order to bail or close out their positions the shorts have to buy. this is what's called covering. when a lot of shorts cover at the same time in a panic the stock will surge because what you really have is a lot of people desperate to buy the stock, a lot of demand. they have to buy unless they want their years wiped out as so many shored sellers had in the last few swoons when the market refused to quit and then went right back up and the shorts hadn't covered or bought the shorts. they hadn't brought them in. so where does insider buying fit into the short selling equation? okay, you have a stock with a high short interest. that's a sign that much of the

flow that sold short and some of the people who run the company start buying shares for themself or an outsider coca-cola with keurig and green mountain and santa fe with regeneron, three situations where the shorts kept shorting and they got crushed. they should have done buy, not shorting. it's almost like drawing a line in the sand for the shorts. our stock goes this low and no lower. this is an explosive combination of that kind of insider buying and a stock that is heavily shorted, one that often leads to a hort squeeze that sends the stocks much higher. shorts are smart. in fact a lot of the time they tend to be real smart, much smarter for the most part i've found than what we call long side investors but don't know more about a business than the insiders who run it. if a lot of people are shorting a stock and management is buying it in sizable amount not just in 100 share worth, then you should start doing homework and usually you'll want to size with management and then you can ride it higher and higher and higher and true jackie wilson style and

i regard the santa fe and coca-cola buys particularly of keurig and monster as being inside light buys. the shorts panic and push the shares higher in the desperation to cover their positions, and you make money. similarly when a company with a heavily shorted stock announces a gigundo buyback, that's another line in the situation where companies are managing the shorts. while not all buybacks are bullish some are a downright waste of money. i teach you how to identify the bogus pullbacks in my charitable trust bulletin that i issue several times a day. now a note of caution here. you have to be very careful when dealing with a company in the crossharris of the shorts especially when people are nervous and the market is in bad shape, the shorts have the ability to wreck a stock even if the fundamentals of the underlying company are fantastic. these days the shorts have more firepower than ever i believe thanks in parts to an s.e.c. under both democrats and republicans looks the other way

when shorts raid stocks with bogus stories about accounting issue and management blunders. plus it's pretty easy to do as a stock -- stock owners no longer have the benefit of rules that slowed short selling down and made it harder to create bear raids, rules known as an uptick or higher price before you could sell short stock, a good rule that somehow the government got caulked into abolishing in order to make trading quicker and more fair for the shore. a lot of good that did for us. the leading reason why so many home gamers have left the building. we establish these rules in order to stop the formenting of panic, something that happened during the great depression but the government in all of its wisdom thinks to think the panics are no longer possible so we have to be more careful than ever not to succumb to panics and that's been orchestrated by short sellers who need prices to go lower. without the protections the shorts run wild and assassinate the stocks of many financial companies during the crash of 2008 until the generational bottom of 2009 put the bulls

back in control and the shorts came back with aggressive negativity in and after many runs this time using weapons of mass destruction like double and triple etfs so when you're dealing with a heavily shorted stock that's in one of those etfs like the financials have you to learn to tread carefully. can you still find great opportunities in stocks where the shorts have overreacheded a the insiders are buying but before going into one of these situations i have to warn you that the balance of power has shifted in recent years in favor of the shorts against regular individual investors. that means even if the short sellers are wrong short term about a company's prospects or even long term they can still demolish the stock, pegsfully they mount campaigns against the stock, like with herballife and bill ackman. the hedge fund manager was taking on the company, even he's been buying back stock and smart managers are on the other side of it. just don't underestimate the amount of damage the shorts can do, although remember. the best protection against these raids is offer from stocks that pay good solid dividends. short sell verse to borrow stock

to short the stock, and that means they have to pay the dividends to the real owners. that's a terrific deterrent for those who are pernicious in the way they go about shorting. when you see a stock with a big dividend being attacked by shorts and the dividend is going high, oh, what a terrific place to be, especially if the insiders are snapping up stocks too. that would be thrice blessed. bottom line, insider buying plus f-heavy short interest can equal raging buys where shorts are determined to crush the stock at any price. speaking of herbalife. let's go to bob in florida. >> caller: great following you. i'm an action alert follower. wish i had gotten on board earlier >> you support us. thank you. what's going on? >> caller: i'm recently retired. i've saved up well over my lifetime, and i've looked at what the longevity of my savings, and as long as i manage things well i'm in good shape.

>> 65% right now allocated in stocks split about halfway between what i follow you with and the other half in index funds. >> okay. >> caller: and then the remainder is split between bond funds and cash and, you know the cash fluctuates up and down. >> sure. you're doing it exactly right, teach you in action alerts. >> caller: well, i've been paying attention then. >> thank you. >> caller: thank you. >> well, you've got it dead right, doing exactly what i like. no criticisms. if anything i just totally endorsed that. trying to spot a raging buy? here's a tip. when you see insider buying plus heavy short interest and then a buyback in a dividend well you've got something. just be careful to avoid a situation where the shorts are simply determined no matter to crush not just the stock but the business itself. stick with cramer. >> mr. cramer absolutely love

the show. >> we really appreciate you out there, man. boo-yah to my kids in elementary school. >> boo-yah, mr. cramer. >> i know you hear this all time, jim, but thank you, thank you, thank you so much. >> this has been my best year by far and away in the market. >> i want to thank you for looking out for the regular guys out there. >> i'm trying to teach people to be better investors and i'm doing my darned best. that's the goal here. >> great to hear your voice and know that you're there for us.

among my critics, that i'm all about trading. >> buy buy, buy. >> that i don't have any vices worthwhile for investors, i'm all short term. that's entirely untrue. the show has adjusted over time moreved so to speak and more will longer term investing and not trading and if you've watched in the last five years you know that. knowing how to trade simply can make you a better investor and trading around the core position is one of the most basic and useful disciplines out there. many people have asked me jim cramer on 2008er what do i mean by it. markets like this periodic swoons and big runs since the

bottom in 2009 it does help to trade around. what does it mean to trade around a core position? let's go through it step by step. first you need a stock market. pick one that you like one you've got an opinion on one where you have a bias and really want to buy as it goes down. finding a stock that you believe will be going higher over the long term is what matters even as you accept the fact that it could go down in the near term. what you're real looking for is a great company with a stock that could get tossed around by market volatility but ultimately will get higher if you're patient. if you're just investing set up a position in the stock. pike in increments because we all know that buying all at once is arrogance and that's not going to be allowed on "mad money." why don't we use google as an example because i like that stock very much have since it became public and though only over the long term will i tell you that i like it because it's very shol tile short term and given the quick pitfalls and declines. want to own 100 shares of google over time. the way to set up that position would be buy 25 shares several

times over a period of weeks orran months. that's your core position as an investor. let's say you want to trade. i know manich you want to but you feel discouraged because you remember how all that amateur day traders, remember all the day traders that got blown out when the tech bubble burst, the key word was amateur. you home gamers can make money trading if you do it right, like a professional. in the old days when commissions were higher, that won't true. the commissions would eat at your profits and it wasn't worthwhile to trade. that hasn't been the case for ages so let's come back to our co-core long-term position strategies, want 100 shares of google and own it long term. let's say it's trading at $500 a share for the purposes of the show. every time the stock jumps 25 points or 5% if you want to trade around position to preserve capital you might want to sell 25 shares. you shave a little off to bring in some profits, so once google reaches 525 you would own 75 shares. you keep scaling out the same way, although always i love the stock, i like to keep that last 25 shares. then you wait until something happens to new york city stock down to where you bought, it as

long as the news isn't specific to google thereby damaging google's prospects. we're in a world where stocks can get crushed by all kinds of factors that have nothing to do with the fundamentals, and as the stock comes down we buy it back in increments. since we bought in 100 shares, let's buy it in 25 increments so if google comes back from 500 to 575, buy 25 shares and another 25 down 5% that is if you sold at 15 an not just 25 on the way up. even take your winnings this way and help buy 25 more if it keeps going low and you only got to sell 25 before the swoon. this might appear to be small potatoes, up 5% to sell 25 shares and down when you started to buy 25 shares and repeat the process on way back up. remember, you don't have to do anything. you can just hold it that's fine with me but people asking me what trading around a core position is and that's what it's about. a lot of people think trading is incredibly exciting and it can be and if you're good at trading around a core position it's right to be bored there. he's nothing exciting about the

plan i just laid out. all you're doing is watching the stock move trimming up or adding to your position right. contrary to the image of trading as something reckless errand responsible, trading around a core position is the height of prudent portfolio management. buy at lower prices where you can buy at more stocks and have more room to work and it can work with google at a $500 stock. if you own a stock and you like it you don't need to do anything. this is in response to many questions on twitter and in my career about how i used to trade when i was at hedge fund trading around a core. obviously scale the numbers depending on how big your position is. the basic ideaed is to avoid putting yourself in a spot where you have too much in a table in case the stock gets swatted down or too little on the table that you can't take advantage of any upside that comes your way. trading around a core position is a basic trading strategy that you can use even those of you who fine the notion of trading as opposed to investing to be

abhorrent. want to take your trading to the next level, the ultimate level i recommend there's two chapters on options and getting back to the strategy i used in my old hedge fund. i uses to think before "options action" that some of this material was too sophisticated for tv and i no longer think that. you need to put in homework and if you have the time and inclination it's worth the effort. the stock i demonstrated happens to be google and you can see my strategy of what i call stock replacement and getting back to even works better with options than with the common stock. it's kind of like a cheaper and less risky way to what i call creating a google at a more reasonable dollar amount price than it currently sells at. this stuff is hard but i am reacting to the requests i get all the time at james cramer on twitter as many want to know about the options strategies i use. can't use options actions. i'm old time on this and all there to use and if you don't understand options at all, let alone the sophisticated strategies i lay out getting

back to even, if my first handbook "real money," my first compilation of what i taught people who went to work at my hedge fund so now you know how to trade around a core position if you're so inclined one more med out of my madness, a lot of small gains that add up over time. you don't need to do it but now you know how. stay with cramer.

you can call me shallow... but, i have a wandering eye. i mean, come on. national gives me the control to choose any car in the aisle i want. i could choose you... or i could choose her if i like her more. and i do.

oh, the silent treatment. real mature. so you wanna get out of here? go national. go like a pro. i've got one more trick to teach you tonight, one more method to my madness, and this time i want to talk selling. >> sell, sell sell. >> which along with when you buy, what price you buy, may be the most important and definitely the most undervalued tool in your home arsenal. how do you know when to sell a hot stock and how do you get out before the party ends so that you're not one of the last people around who get stuck cleaning up the mess? this is a question that needs to be answered because there's a lot of money to be made owning hot stocks with lots of momentum, but when you play the momentum game you have to know when it's time to leave the table that's what's crucial. there are always naysayers and

eventually the naysayers are almost always proven right sooner or later. virtually all hot stocks implode except for the ones that over time are able to develop into multiple business streams that. topping process happened big in recent years with stocks as diverse as chipotle or intuitive services or smaller biotech stocks get blowing up but it usually occurs sooner rather than later and all the talking heads that kept you out cost you a great opportunity to make money. people shy away from the stocks because they don't know where they are going to top out. that's understandable. i'd be afraid to buy them too, if i didn't have a discipline that let me know when to get out. lucky for you i do have up and you're about to learn it. first, when i'm talking about hot stocks i really mean hot speculative stocks stocks with companies with low market capitalizations. usually the stocks begin with very little research coverage from the major wall street brokerage houses. these names can go up for a very long time catch fire and stay on fire for years without sponsorshipch the key to figure out when interest has piqued is

watching the analysts roll out. a good rule of thumb is once one of the hot stocks gets discovered and then has at least half dozen analysts six analysts covering it then the run will peter out and not get stronger because it will be too big and too well known to continue to go up the way it has. it's the rare stock that doesn't behave this way. you can find out how many guys own a stock by looking at it anywhere on the internet. this isn't hard-to-find information. was at one time but not anymore this. formula has worked for me as long as i can remember. as far as i can tell works because the number of analyst on a stock is good gauge of how many awareness and interest there is in a name and names don't get hot followed and pushed by everybody. they get hot because they get discovered by everybody. hot stocks get tapped out. when there's nobody left to be attracted to them. when all the people who would be interested in buying them have already bought. they came out of nowhere attracting more and more attention, more and more backers and eventually everyone who wants a piece of the stock has a piece of it.

when that happens, the run is over, people and then you must ring the register and go home. let me give you a great example. hanson natural, the old monster beverage. that the name it used to be before it maime mnst one the hottest stocks in 2004 and hottest stock in 2005 and hottest stock for the first half of 2006. split adjusted hanson went from $1 and change to beginning of 2005 to $200 when it peaked in july of 2006. the whole way up there were people telling you hanson, a beverage company that real got its momentum from its monster energy drink, was a fad, had to dry out. had to cash had to crash. well, it did do that but as often as the case it took years for the momentum to run out, not days, not month, not weeks, years. i called the top on hanson back then because i know how the stocks work. peaked in july of 2006 in part because of the fact that the company did a five for one split and even the splits that aren't supposed to do anything, this encouraged people who had been in hanson for a long time to take something off the table. sell one, two shares but there was another reason i believed it

would peak and that was it picked up its fourth handle in may of 2006 when goldman sachs started covering it. you had two months to sell between goldman's initiation and the stock's peak. still upside left after goldman started coverage but prudence dictated we sell once the stock four analysts on it. better to clear out early with your wings than wait for them to fade away and hanson as with all other stocks hot stocks started to cool off once it hit that critical mass of analyst coverage. incredibly after hanson fell off the radar screen people stopped talking about it an and lift coverage dwindled again and the stock recharged, powered higher and again ultimately coca-cola bought a huge stake in its equity which sent it up even further, a stock i still like. an amazing renaissance, but, again, really a testament that when analysts stop following a company or do so on a basis that the company's earnings start percolate again as was the case with monster, a story lazarus-like move can happen.

it turns out that the fad drink ended up vanquishing the competition from major soda brands that failed to materialize and only biggest one joined it rather than keepfyinging it, but again, as analyst coverage gained the stock, so many analysts covered it, the stock peaked they dropped, it stock bottomed that's now it works. bottom line stock speculative steamy hot stocks are worth owning but you need to know when to sell and that moment comes when too many analysts jump on the bandwagon. use four as a rule of thumb letting you to know when to start selling. stay with cramer. n+]wúa"l4m3qj@(w?5bzppsng:1oxcl1i$%dp

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plus, a front row seat to three market debuts and ceos. >> i mean this is an extraordinary gain. it was priced at $1.2 billion. it's doubled in value so $2 billion have been created

instantly. >> on cnbc. got to get some of the tweets you've been sending me @jimcramer #madtweets. our first tweet from jason, look at news techs and what are some water resources you recommend for technical analysis and indicators for the novemberies. i get most of my technical analysis from realmoney.com and that's one of the things i did in "get rich carefully" is pick the best technicians who explain what these terms mean and then show you them in action and that's what i did in that book. next a tweet from from @redsquare27 #getaplan. if i'm actively trading my raw should i have in an index fund or both. that's not the case for a 401(k) which is why i like the i.r.a. options so much more.

next, jim, i've watched you daily for over ten years, daily. you are awesome. you've helped massive amounts of people. thank you. i cannot tell you there are so many people who come up to me and they apologize that they want to tell me that they like the show. excuse me, jim, i don't want to bother you, about i like the show. no, when you say excuse me, i usually think you're about to say boo. don't excuse yourself. i'm absolutely thrilled that you say that you like the show. it means the world to me. i sometimes figure what the heck do i come out here every night for other than the fact that you like it? @clearbaffles tweets the following, please discuss balance between adding to a position and selling your cost base. same apply to etfs or cost cost, #getaplan. as the stock goes down i buy and and is the stock goes up i like

to -- i run a charitable trust so i think typically what i try to do is lower my basis as an owner. why do i want to lower my basis? because i don't like chase and i do like buying at a discount and lowering my base sits equivalent of getting a stock i like of a company at a cheaper price than i got it before. that means i'm getting a bargain if the fundamentals are still good. next @jimcramer has more followers than wyoming has people i like his stock advice better, too. wyoming has more oil than i have. oil wins. jeff asks our next question. i have a long list of research companies that like to invest in but don't have money for all of them. how do i narrow my list? #getaplan. what you've got to do is figure which of the best at which levels. if you like them all, try to figure out what level would be the one where you'd really want to buy something and then stick by it because once a stock is coming down people run from the levels instead of to them.

stay with cramer. it gets talked about... ♪ ♪ ♪ so you can live the way you live, and enjoy all the rewards. chase sapphire preferred. so you can. ♪ grind virtually any kind of food waste into an unending source of electrical power for a city? when emerson takes up the challenge it's never been done before simply becomes consider it solved. emerson.

new york state is reinventing how we do business by leading the way on tax cuts. we cut the rates on personal income taxes. we enacted the lowest corporate tax rate since 1968. we eliminated the income tax on manufacturers altogether. with startup-ny, qualified businesses that start, expand or relocate to new york state pay no taxes for 10 years. all to grow our economy and create jobs. see how new york can give your business the opportunity to grow at ny.gov/business i like to say there's always a bull market somewhere, and i promise to try to find it just for you right here on "mad money." i'm jim cramer, and i'll see you next time.

>> in this episode of "secret lives of the super rich," a revealing look at a mega-home built for the ultimate gadget freak. >> you're talking millions of dollars just in wiring. you could be anywhere in the world and you could say, "oh, i want to open up the doors to my gym." look how cool that is. >> the $80,000 super dog is your best friend or your worst enemy. [ dog growling ] think of this as a giant safety deposit box. >> they don't necessarily ever drive the car sometimes. it's really an investment for them. >> cars as commodity. and an underwater treasure. the fish farm raking in tens of millions of dollars producing a delicacy for the super rich. >> this is