Before you jump into following Jim Cramer's Mad Money stock picks, it would be very wise to track his picks, so you can have a detailed and unbiased record of how well they perform, both in the short and long term. This is also important in order to assess the best strategies to use when considering a trade or an investment based on one of his suggestions.

What one must really understand when looking to invest in Jim Cramer's picks is that, although most of his picks are meant as longer-term opportunities, in the short term, many of them can easily get overbought -- especially when all his followers decide impulsively to buy at the same time. This is absolutely the WORST time to consider buying the stock!

Although Cramer may be right in the longer term, the only reason the pick moved that day is, more than likely, because many of his followers jumped aboard, hoping to make a quick buck. So, unless new buyers come in very soon for some other reason, the stock will likely trade right back down to where it started.

Consider what Jim Cramer himself is telling you. He will not buy or sell a stock within 5 days of mentioning it on the show. Now, with that statement, what he's also telling you is that, for a long-term portfolio, he doesn't need to act any faster than that. In fact, he can gain valuable insight into the stock based on how it performs after it is mentioned on the show.

For example, if a stock jumps after he mentions it, and every time it does try to dip back, new buyers come in and bring the stock back up, that is an indication that his thesis -- possibly in the long term – but, now, more importantly, in the shorter term -- may very well be "right on the money", and, possibly, this might mean that it's a good time to initiate a position.

If, however, the stock merely jumps and falls right back with little or no new buying interest coming into the stock, that is also just as telling that perhaps this stock is not ready yet, and, now, anyone who jumped aboard into the spike will bring the stock lower as they all liquidate their positions at increasingly losing prices. (These will likely be the same people who will go on to send Cramer hate mail.)

When all of this pressure capitulates into a panic in the stock, THAT is the time to consider your long-term stock purchase / investment!

Analysis of Cramer's picks at sites such as theStreet.com's relatively new Mad Money Performance section, combined with powerful shorter-term tools and analytics (try the free alert and charting tools at http://www.yourika.com/tymAlertsMadMoney.html and http://www.yourika.com/MadMoneyCharts.html), you'll discover that it's best to wait for the dust to settle after a stock gets pumped up and watch for a few days to see how trading unfolds. In fact, it may even set up a nice intraday shorting opportunity for more advanced traders.

Cramer does have many good ideas, and he definitely knows about stocks. For that, I too enjoy watching him and listening for new ideas that may interest me. But, add a little common sense to the equation, and you are on your way to a really winning plan.

*Reprinted (and modified) with permission from Alexander Paul Morris, President of Yourika Corp. at www.yourika.com

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