A lot of investors spend a lot of time trying to find the next Chrysler. You know, the "crash" stock that goes from $2 to $200. Unfortunately, buying crash stocks often leads to poor returns. That's because stocks that are cheap are usually cheap for a reason. Buying a stock simply because it is down a lot from its highs is often a recipe for disaster.

I think you can improve your odds when investing in crash stocks by following these four rules:

1) Be patient. Make sure the stock has truly bottomed. How do you know? Well, you never know for sure. Still, you can improve your chances by allowing the stock to trade within a narrow price range - say 5% from the top of the range to the bottom - for several months. Don't buy a crash stock that is trending lower.

2) Bet with the corporate insiders. Corporate insiders - executives, directors, and majority stockholders - presumably know more about a company than outside investors. If you see corporate insiders buying a stock that is dramatically depressed, chances are they are expecting a turnaround. You can obtain insider trading information at www.insidertrader.com.

3) Look for improving earnings momentum. It is difficult for companies to sustain a rally without earnings momentum. Earnings momentum doesn't mean that you have to wait until the company is showing positive quarterly earnings gains. Earnings momentum can mean that a company's losses are declining.

4) Bet only on companies with strong balance sheets. Avoid crash stocks whose debt is at huge levels. These companies will have a difficult time coming back.

Finally, in order to make big money in a crash stock, you don't have to buy at the exact bottom. Even if you buy the stock several points off its low, you can still do quite well. Thus, it is better to wait to see definitive improvement - even if it means missing the exact bottom - rather than speculating that things will improve.