Stock market from Home
Jianying yin | iStock | Getty Images
First, pick a stock that you like and believe will go higher in the long term. Think of a company with solid fundamentals that can stay strong when the market becomes volatile and will go higher with a little patience.
Cramer recommended establishing a position in the stock through buying in increments. Buying it all at once is just plain arrogant, in his opinion.
For instance, if you want to own 100 shares of your favorite stock over time, buy the stock in increments of 25. Buy it four times over a span of weeks or months until you reach 100 shares.
For those who want to live a little and trade, Cramer says home-gamers can make money, too, if trading is done right.
To begin trading on a core position, every time the stock jumps 5 percent, sell 25 shares. Keep shaving a little off the top to bring in some profits. This is called scaling out of a stock, though Cramer always likes to keep the last 25 shares if he loves the stock.
The next step is to wait until something happens to the stock that knocks it down to the same price where you bought it initially, as long as the news isn't specific to the stock. When the stock comes down, you start to buy it in increments again.
This might appear to be small potatoes, but over time the profits add up. Up 5 percent and sell 25 shares, then buy it from where you started. The cash in your pocket will start to accumulate.
"A lot of people think that trading is incredibly exciting, and it can be, but if you're good at trading around a core position, you should be pretty bored. All you're doing is watching the stock move, and trimming or adding to your position accordingly, " Cramer said.
The purpose of this technique is to avoid putting yourself in a position where you have too much money on the table for a stock. This way, if the stock takes a hit and goes down, or if you have too little on the table to take advantage of upside, you are prepared.