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. other people want to make friends. i'm just trying to make you a little money. my job is not just to entertain, but i'm trying to teach and coach. so call me at 1-800-743-cnbc. every time you think you have seen it all, every time that we're -- we thought, there can't be anymore scandals as bad as the last one or anymore chicanery that can top the most recent travesty, wall street

comes up with a new twist. if you're not protected, make you feel like it's just not worth it to be involved in our beloved stock market. i can't tell you how many days i come out with bad ipos or insider trading or flash crashes and say how can people take this anymore! the abuse! the answer, frankly, there's really no other choice. you simply can't make enough money in any other asset class. particularly bonds, where the rates are so, so low, to be able to retire. or take that trip you want. pay for tuition, bonds can't pay that tuition. you've got to own stocks. you know what you need, though. you need a survival handbook. and that's what i'm giving you tonight. first, scandal is not new to wall street. since the 19890s, stock markets, mechanisms haven't always been smooth. the '87 market crash, i traded

that through. that had more to do with machines than anyone remembers. it didn't have anything to do with the economy. it looked like the economy was going to get weak. because of the crash. it didn't. it was strong. we did seem to have ratcheted up the unfairness in the last couple years. and i don't mean the great recession. who can forget the hideous event that was the long-awaited facebook fiasco. may of 2012. this was a once in a lifetime opportunity to bring people back to the stock market who fled. a company that is a billion users coming public. a company that had a sterling reputation, a lot of product, the management quirky, but no more quirky than google where you could have made a ton of money over the years. everyone in it had already gotten rich, the company had tons of money on hand, so wasn't like they needed to be greedy. would have been an unbelievable moment to price a deal so reasonably so everyone won. no, they offered 21 million shares at $38 a piece, a price that both the company and broker knew was the top end of the

range, especially given last-minute chatter that maybe the company was being challenged by the love from desktop to mobile. by the way, something that turned out to be totally true. and the deal flops in an outstandingly horrible way. making matters worse, the nasdaq, exchange, became public owned and the deal fell apart before our eyes. no one could sell. combination, total chaos, confusion and overvaluation. a classic opportunity to bring people back to the stock market was botched. and we had still one more event that drove people to the sidelines. it was just like the dot com bomb that i lived through, 1999, 2000. how about the flash crash back in may of 2010, where the market briefly lost 10 trillion bucks because of a computer glitch. i know, i was on television when it happened. i was on "street signs," one of the most embarrassing events i've ever seen. who can trust that mechanism with life savings. that stock didn't seem like an asset class, seemed like smoke

and mirrors. how about the latest round of huge insider trading scandals, the biggest one en snared a scandal, and the director of goldman sachs and procter & gamble. raj got 11 years in the slammer. i'm not talking about the madoff scandal, travesty, proving they can't protect you from the most flagged scam. many people knew those returns were too outrageous to be real, including people who whistle blew to the s.e.c. to no avail. or all those little busts from satellite firms allegedly connected to s.a.c. capital. how do you vaccinate yourself from this? first, some can't be stopped, no matter what happens. there will always be frauls and if you're able to avoid it, great. you can't gain fraud. second, there will always be down markets. i can't protect you from an economic collapse and what it would do to the stock market, the credit crunch, recession of 2007, 2009.

the recession only caused you to lose less. maybe the great destruction of wealth, let's just say nothing can protect you if you own stocks. but what i can do is offer you some simple rules tonight that will let you have more confidence in the stock market. even if you think portions of it are rigged or beyond your comprehension. and the first rule, know what you own. i know it sounds simple. of course, everyone thinks they know what they own. how does this protect you from the myriad ways, people, machines can abuse you. first, if you actually know what stock you own, okay? and the stock goes down, the flash crash. you'll actually be able to take advantage of that. the mechanical lunacy and buy more at lower prices than you ever thought you would get. limit orders, not market orders. second, if you know what you own, you can handle a stock. take the facebook. facebook is actually a pretty good company. maybe you can buy it on the way down if you actually knew it, get a better know average. third, if you know that you own what you own, then who really cares about guys like the raj or the gupat that or guys nabbed by

the u.s. attorney. what does it mean? if you know what you own, you are in control of your own destiny. but how do you know what you own. in other words, a lot of people think they know what they own. it's not a syllogism. it's a real issue. here is my answer. it's a practical way to look at it. first, say you stopped me coming out of the "squawk on the street" post new york stock exchange one day on wall street. and this happens five or six times every day. let's say you shout at me, you say, hey, cramer, what do you think of that xyz corp? you know what i do? i say hey, listen, you know what, what do you think? tell me what it does. tell me why you bought it. do you know that the vast majority of the time people don't even know either answer? they don't know either answer. they usually got some tip, saw some chart, heard some uninformed source it was going to the moon, but have no idea what business it is in or how it does or how it's doing. they don't know in a lot of cases what it makes, how it makes its money.

they don't know if it pays a dividend, they don't know if it makes money or loses money. they have no idea. by the way, i see this all the time, too. same thing, jim cramer on twitter. people say should i buy more, cut my losses. i always come back and say why did you buy in the first place, and if you don't know, of course you should sell. here's what you need to do. ask yourself the same questions i put to the perfect strangers every day. can you answer them. do you know them. if not, geez, you shouldn't be investing in that stock. maybe you shouldn't be investing any stock. there's always good index funds, mutual funds. here's the bottom line. the first rule of protecting yourself is get some knowledge, please. know what you own. can you describe it to me if you see me at wall and broad? can you tell me what it does and why you bought it, and give me a three-sentence pitch about why it's good. if you can't, don't bother me and don't bother buying. here's the promise and a prediction. you're just going to lose yourself some big-time money. why don't we start with some questions.

let's go to scott in colorado. scott. >> caller: hey, boo-yah, jim. jim, i have a question about price targets. an analyst sets a target price. how does that fit in my planning for evaluating stocks, and when does that price target expect to be fulfilled by the analyst. >> one of the reasons why i am neutral in price targets, we do some for actionalertsplus.com my charitable trust. as the stock goes down, they keep making their price targets lower. and then as the stock goes up, make the price target larger. really isn't all that valuable. what i find valuable, what they think the stock is going to earn. and then we try to apply a multiple to it. so the key thing is the earnings estimates of the future. that's why stocks trade where they do. profits. and then we can figure it out on a case-by-case basis. don't use their price targets. steven in california. steven. >> caller: yes, jim. boo-yah to you. >> boo-yah back. >> caller: okay. i was wondering, i bought a stock before, and it had a

reverse stock split. and it didn't do that good. i'm wondering, when a company does a reverse stock split, are they trying to make it more interesting for other companies or -- or are they just trying to save money? >> no, no, it's a great question. what they're usually trying to do is save embarrassment. citigroup did this. they really felt that a stock that was under $5, for instance, wouldn't attract institutions, they like to buy stocks that are over $5. as a way to gussy it up a little, it has nothing to do with the fundamentals. don't be confused. it doesn't help the fundamentals or hurt them. but it does make a stock more investable to institutions, whether you think it should or not. everyone needs the stock market. everyone needs a survival guide to the stock market. and it's a jungle out there, so the way we're going to start is, if you know what you own, and can explain it to me, then you can buy more if it goes down. "mad money" will be right back.

don't miss a second of "mad money." follow @jimcramer on twitter. have a question, tweet cramer #madtweets. send jim an e-mail to cnbc.com or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com. vo: traveling you definitely end up meeting a lot more people but a friend under water is something completely different. i met a turtle friend today so, you don't get that very often. it seemed like it was more than happy to have us in his home.

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welcome back to cramer's stock market survival school. where i'm giving you your ged in trading during tough markets,

your b.a. investing, your masters in what to do when the machines rise up. kind of like "terminator ii" judgment day, caused the stock market to plunge for no reason. look what happened on may 6, 2010. if you listen and listen well, maybe you get your doctorate in making money when everyone else is losing it. there's the degree i want. we may not be able to control the amount of pain the market throws our way. but we absolutely can control how we deal with it. we can control whether we're prepared for the pain, whether we're positioned so that we don't lose more money than we should because we have taken some proper precautions. later today i'm going to explain risks that come with owning stocks, risks you need to watch out for in order to gain wealth. right now i'm going to talk about the risks that come from being a human being. from simply being human. there are many of them. and if you're not careful, you could end up doing more damage to your portfolio than any external force, any negative that takes down stocks.

basic investing mistakes can lead to enormous investing losses. i'm going to help you make your portfolio safe from maybe yourself to ensure you're in a position to make money, not endlessly lose it no matter how broken or rigged the game may seem to you. you know i don't think it is, but i do not quibble with those who think it is. it's too hard. in a tough market, you can't afford to make the easily avoided mistakes that regular investors find themselves making all of the time. you don't want to make it harder on yourself than it has to be. so with that in mind, here are my rules for agony-proofing your portfolio. immunizing yourself against huge losses. lesson number one is to know what you own. remember, each one of your stocks requires time and homework. got to be able to explain it to me. if you see me on the street, what it does, and why you bought it. lesson number two. never, ever buy stocks on margin. meaning, do not borrow money from your broker to purchase stocks. these are not homes that you can live in if they go down. so it's okay for you to take out a mortgage in that case.

but not in stocks. it's not home. it's a piece of paper. and that piece of paper can go down in value. threatening your nest egg. yep, the practice is just plain dangerous. the brokers want to make money off it. buying a margin may seem like a great method for making a small amount of money go a long way, but in reality, potentially a way to wipe yourself out. you can't take losses, can't sustain them, can't buy more as your stocks go lower. the margin calls come in and you have to sell your own position to cover what you owe. it's simply to the safe. nobody needs that level of risk. nobody. i consider margin the equivalent of juicing in professional sports. starts off great. ends very badly. lesson number three. and this is also something i hit you over the head with all of the time, but -- well, it's just so crucial, i've got to explain it again. never use market orders. when you pick you the phone and call your broker and tell the buyer sells stock but don't name the price, that's a market order. you may not realize it. but what you're doing is you're giving that broker permission to fill your order at any old price

the market gives you. okay, so let's ask that. you go to the supermarket. i'll buy this head of lettuce at any price. would you do that with a sweater at the mall, i'll take any price you give me. no, you would never do that. and you shouldn't to it with much more expensive things called stocks, either. market orders are how people ended up selling proctor and game bell for $38 a share even though it was worth $30 more on thursday, may 6 of 2010 when the machines took over and we tumbled a nearly thousand points. the flash crash. in the time it took me to walk out on the set and just sit there for "street signs". with all the nasty stories of conflicts of interest, you probably recognize while your broker may be a great and helpful person, his interests aren't necessarily aligned with yours either. his top priority isn't necessarily to get you the best possible price in your trades. that's how he's often paid. that's not what we do on "mad money." why i don't have any conflicts. i don't want your commission. have i ever asked for any fees?

no. that's why you have to trust me. instead of placing market orders, i'm urging you to use limit orders, easiest thing in the world to do and doesn't cost a penny more. could save you a fortune. tell your broker the highest price you're willing to pay and lowest you're willing to accept if you're selling. that way you will get your price or if the stock isn't there at that price, the trade won't happen. that's okay. you've got to protect yourself. always use limit orders, not market orders. never forget the less than of that awful bogus down thousand-point day. because first of all, it could happen again. and because it wasn't bogus for those who used market orders. yeah, because those trades really happened. they got hosed. i don't want you to follow in their footsteps. i want you to make money. buy stocks at your price. here's the bottom line. if you don't buy stocks on margin and you use limit orders rather than market orders, buyer sell, you will get hurt a lot less than others who don't know better. these are the first steps to making sure you survive a horrible market.

rather than getting panicked at the scale of your losses, and then getting blown out. after the break, i'll try to make you even more money. nobody is more passionate about the market than i am. nobody in this whole country. >> caller: i wanted to thank you. you have saved my retirement. >> you are why i come out here and do this show. thank you so much. >> caller: the stuff that you're doing for all of us is so important, and i just want to say thank you. >> caller: my husband and i watch every day, and we count on your help for small investors like us. >> put cramer's 30-plus years of experience to work for you. "mad money," weeknights on cnbc. hey, what's going on here?

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every upgraded experience comes from listening to our cardholders. visa signature. your idea of what a card should be. tonight we're going back to school. cramer's stock market survival school, that is. because when the market is in awful shape, when it's broken, there are very real worries the system just isn't working correctly. and we know it can happen, even in outrageous bull markets. maybe then it's even more important than ever to know how to protect yourself. every investor knows stocks sometimes go down. nothing you can do about it. the nature of the game. don't be in the game if you think your stocks will never go down. there are times, though, they go down harder than others. at times they go down relentlessly and the agony is unbearable or the ecstasy nowhere to be found. that's why i've gone over three important lessons tonight. always know what you own, never buy on margin, never use market orders, only limit orders to buy and sell stocks.

these are basic rules, sure. but they're basic because they're critically important. they're absolutely essential to building and maintaining your wealth. now i've got four more lessons to help fight the pain in an excruciating market to prevent from you losing more money than you have to. this is corollary to the need to know what you own. you cannot own too many stocks. knowing what you own takes time. it takes homework. i always like to -- the maximum one hour per week. i understand, if you can given it a 15-minute overview. much less than that, you might as well be gambling. if you don't know what you own, then when your stocks go down, you have no idea what to do. should you sell, cut your loss, buy more? only way you can feel confident is by doing the work and understanding the companies in your portfolio. and that means simply not safe for many homeowners to own more than ten stocks at once. now i know that many of you own far more than that, and look, i at various times owned 20, 30, i can understand that. as soon as you get above ten, you run the risk of just

actually running your own mutual fund. you shouldn't feel compelled to try to mirror the s&p 500. there is no good reason to own 30 stocks when ten high-quality diversified names will do, unless you're really a full-time home gamer. you can't handle 30 stocks, even 20. it's like having a part-time job in addition to the one you have. ten is just right. more than ten, you start skimping on the homework and that's incredibly dangerous, especially at times when stocks seem to go down a lot. periods when we're in a bear market, horrendous to have that many stocks. necessary lesson, don't own too many low-dollar stocks. first of all, i'm the only guy on tv who recommends speculating and i accept single digits. they help by making a market investing interesting. they allow you to keep your head in the game and others being blown out. and while it's still safe to have a speculative stock in your portfolio, the emphasis there is on the singular -- single speculative stock. not more than that. because it's sexy and as tempting as the single names should be, they shouldn't make up your whole portfolio, they're risky.

you want the colgates and cloroxes. no company stock falls below ten bucks for doing well. no ceo says boy, i want my stock trading in the single digits. hence, why i told that gentleman why many want to do reverse splits, make their stocks seem more investable. it may seem like under $10 names have less down side. but that's simply a trick of the eye. single digit stocks can go to zero and wipe out your investment like any others. own more than one and many of you do, you may be gambling. next lesson, and this one i beat over your head every wednesday, on am i diversified. so critical to your investing success, i'm going to tell you again. you must be diversified. only free lunch. meaning it doesn't cost you anything, but it saves you money. that's the point i make in jim cramer's "real money," the handbook i used to run my hedge fund. no matter how many times i say

it, many of you keep too many stocks in the same sector. i keep getting them. i can't believe after all these years. why shouldn't you put all your money in one hot sector? why do you have to spread it around? so that no more of your portfolio is in the same sector when the hot sector could make you so much money? because the biggest risk out there is sector risk. just ask the people who doubled down on tech stocks in 2000 and lost it all when some big bad event happens, one that can really damage an entire sector. only some of your stocks will go down if you're diversified, and maybe just maybe others will even go up. same thing with the bank stocks and the 2008-2009. people who owned banks were hot. housing stocks were hot. finally, when the market is getting killed, it's important to have enough dividend-paying stocks in your portfolio, especially stocks with ahys, accidentally high yields. most people don't realize the importance of dividends. they think they're boring, for senior citizens, retirees only. you know what?

like i told you earlier, going back to 1926, fully 40% of the return from the s&p 500 come from reinvested dividends. by the way, you always have to reinvest. when you for go dividends, you make from stocks. and all the reasons that make dividend stocks worth owning become even more compelling in a down market. that's when they really, really give you that cushion. yes, they're even a trampoline, because as their share prices go lower, their yields go higher, making them more attractive to other investors who don't own them yet and giving you a better return for just owning the darn things. you can buy stocks with bountiful dividends safely on the way down. i can't emphasize enough how important that fact is in a horrible market. there are so few stocks you can feel confident can buying as they go lower. stocks with big dividends, especially the accidentally high yielders, meaning stocks that used to have small yields, but because their share prices have gone down, not because they cut the dividends, their yields have become notoriously big. and they're one of the few groups you can feel comfortable with picking away at.

accidental high yielders work better than any other kind of stock during the financial crisis. remember, the dow went down to 6500, and they still work, whenever the market gives you these dividend bargains. and by the way, those big dividends for companies can that can afford them, well, they are bargains. mark in my home state of new jersey. mark. >> caller: yes. boo-yah, jim. >> boo-yah, mark. >> caller: do companies have to publish their x dividend dates, and how many days or weeks before that date do they have to publish it? >> you can get it -- everything is on -- all the different finance sites have it. remember, what i care more about the price you buy the stock at, not the price -- if you don't have the dividend, then you're getting it -- you buy without the dividend. if you do have the dividend, get it with the dividend. it's cheaper without it. these are just all -- i don't want to say their sleight of hands, but not something you should worry about. what you should worry about is buying high-quality stocks. if the dividend stock adviser, which is actually a fantastic newsletter that thestreet.com has, explains all of this.

a great place to look, okay? let's go to louie in california. louie. >> caller: good afternoon, dr. cramer. >> thank you. >> caller: i have a question about diversification and risk. i watch your show for several years, and i am now newly retired. i own eight positions. i've followed your advice and bought a good company in stages. when it dips a little bit and sell a little when it is at a temporary top. every time i sell, i allocate the profit, return on my capital, leaving the profit allocated to the remaining shares of the position. so now i have four stocks that are 60 to 100% owned with house's money. and that's a profitable boo-yah! >> that is so perfect. you are just the total game-playing. can i help you? >> caller: yeah. here's the question. the other four stocks at risk that i have, i own are diversified and balanced, and most have some profit. but some of them overlap the other stocks owned with house's money.

so which is more important, diversification and balance of the whole portfolio, or diversification and balance of those shares still owned by my capital. >> well, you know, if -- you know what i'm going to do? this is the first time i've ever had this question. and what i'm going to say is, if you're playing the house's money, i'm going to bless the lack of diversification. you're not going to give it back. diversification is about not giving it back. but you can, because you've already won. how about josh in louisiana. josh. >> caller: boo-yah, jim. >> what's up? >> caller: hey, i was just wondering how you use the futures market to judge how the market would do throughout the day. >> i hate it. i won't use it. i think people who use it are lazy. they are just simply looking at how europe was or asia was and making a determination. forget about it. we trade stocks, not futures. that's quite simple. so look, you've got more tools for your survival now. we have -- we dote on too many stocks, right. we know we should use -- limit

the number of speculative stocks, because they do tend to trade together. we know that diversification is key, i call it the only free lunch. and we know to focus on high-yielders, particularly in times of trouble to reduce your risk. stay with cramer. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting

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all night i've been teaching you how to handle the inevitable corrections, part of cramer's stock market survival school, going over things you can do to minimize your down side, protect

your portfolio against action that is nasty, at the time of the fiscal cliff or the original sequester scares. i want to go a step further. in order to deal with increased risks from a market that's gone up a great deal and many consider to be frothy, you need to understand what those risks are. you need to know what might cost the next selloff. you need to be familiar with forces that are causing your stocks to get hammered that you may not even know about. in other words, when the market corrects and you know it's going to have to, you need to know why. you need to know what's really hurting your stocks. now we like to think that when a stock goes up or down, it's because of what's happening at the underlying company. that's quaint, people. companies that do well get we regarded with a higher stock price. quaint, again. and ordinarily how things used to work. but you know what, if a vicious decline, the connection between a company and its stock can become gossamer-thin and often severed. you'll see the stocks of good companies get taken down right with the bad ones.

even when they report good news. that's the kind of action that can drive investors completely insane. if a stock can't go up, reporting a blowout quarter, well, then you're probably thinking, what -- for heaven's sake can make anything go higher. is there anything at all distinguishing the good from the bad when the market is selling everything. why even bother to do the homework that cramer always says you should do. yes, there is a reason, because eventually we're going to come out of the selloff, and the fundamentals are going to start mattering. hell, it can take a while for it to happen. in the interim, it's crucial to recognize why this is happening, you might make some sense out of the chaos. and really tough quick percentage spill, you will see the good, bad and truly ugly all going lower. some absolute pure panic. but there are also structural reasons why this happens and you need to know them. see, hedge funds have turned stocks into an asset class closer to baskets of corn or lumber. they've -- and this is a verb that's new. commoditized equities, the origin of much of this lockstep

action where they trade together. how have they done this? well, because for many of the big institutional money managers, individual stocks are just too small to handle the amounts of money they're dealing with. so they turn to the s&p 500 or the big etfs that allow huge bets to be made in seconds. in a difficult market, rising tide of optimism takes over, okay, these hedge funds -- i'm sorry, pessimism. these hedge funds will just sell the futures. as soon as they get pessimistic, sell the futures, bang them down. and sell the etfs and that brings down everything in the s&p. there is also an element of group think. here most managers tend to act like herd animals. think wildebeests like on the discovery channel, caused them to blow out entire sectors at the same time wreaking total havoc. we saw it over and over in the bad old days. the ideas of stocks as paper risk. meaning all the things that can cause a stock to go down that have nothing, absolutely nothing

to do with the underlying company, and that mystifies you. everything you do with the way the asset class of stocks is traded. these are risks that have nothing to do with earnings, nothing to do with the fundamentals of your company at all, but still insert an enormous amount of control where stocks go, especially in a pessimistic infused bear market or one of those incredibly quick declines that we always must be on the lookout. what kind of risks am i talking about? let's say we're in a prolonged down market. then you have to worry about the ability of short sellers to create fear and panic. because it absolutely trumps the ability of buyers to instigate greed. that means the shorts can push down stocks relentlessly with endless selling fire power. now, this is new. it didn't always used to be like this. certainly not when i got in the business. we used to have a securities and exchange commission that stopped this sort of thing, one that reigned in the shorts and helped you. helped the home gamer. helped the little guy. and then the bush era came along, the s.e.c.

well, lessened its commitment to the individual and increased to laissez faire ideology over reality. they repealed something called the uptick rule, arcane rulers back in 2007 did this. a regulation in place since the great depression, created in the aftermath of the crash of '29 and '32 in order to avert another disaster of the same scale, which curbed the ability of short sellers to bang down stocks endlessly. under the uptick rule, had to wait for someone to be willing to pay more and uptick before they could sell a stock short. and for 79 years, worked. then the s.e.c. got rid of the uptick rules and shorts were able to run wild. you think that's a coincidence they got rid of the uptick rule when we had the great recession of stocks. the shorts were able to continue to run wild whenever we got a particularly nasty selloff. that kind of relentless unstoppable short selling was instrumental in the fall of lehman brothers, one day people will write a book with b this. ever since the problems with greece, portugal, spain and

ireland began. or we have seen it in stocks in our market because of deficit funding or debt ceiling issues or the sequester. sure, when things are good, we forget about the pernicious impact of short selling without risks. but when they are bad, we feel them aplenty, and they aren't fair versus the way the s.e.c. used to price these issues. short sellers aren't the only risk. we have the etfs of mass destruction, exchange traded funds that give you the short-selling bang for your buck, exist only for day traders. that's not the point of our stock market, is it? they don't work for long-term or even medium-term investors because they rebalance every day. take the skf, the ultra short financials pro shares, an etf that let's investors short with 100% leverage. you think this etf would have made people money during the financial crisis. all the bank stocks got pulverized, many wiped out. wouldn't this be the instrument of choice? wrong! lost you money.

one of the worst years in bank stock history and that's what happened. how is this possible? because these super leveraged etfs are designed to attract day to day changes. at the end of every day, they rebalance. they allow you to short or to own. so, here's interesting issue. if these etfs have no value for long-term investors, what's the point of even having them? frankly, it's hard for me to avoid the conclusion that their main function is to allow the shorts to get around the margin rules and manipulate the market with massive selling power at once. this gets at a larger problem that the s.e.c. no longer seems interested in protecting you. here's the bottom line. stocks are not cash. they don't act like cash. they can't be viewed as cash. remember that stocks go down for many reasons that have nothing to do with the underlying companies or their profits, including hedge funds gone wild, endless blasts from short sellers and the massive fire power of the leveraged etfs of

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all night i've been teaching you how to survive rough corrections to a bull market. i've told you about the mistakes you need to avoid making yourself. warned you about the powerful forces that big money managers use to push stocks around like the futures and ultra etfs of mass destruction, things that

can cause the performs of stocks to become disconnected of the underlying companies much more commoditized. but there is one more risk you need to know about if you're going to invest in a dangerous chopping market or one that turns like that. it's that the life guard is off duty and when you go swimming in this market, you better remember from there is nobody out there making sure the water is safe. the s.e.c., which should be working to level the playing field to protect the little guy, they don't think it's their job anymore. at least that's my opinion. the regulators seem to favor high frequency traders who turn over the portfolio 11 times in ten seconds over the ordinary home gamer like you. these high frequency guys make 80% of all trading. there you go. this is the market you are really dealing with. we need an s.e.c. that protects the unsophisticated from these rah patience capitalists. instead we have one that abets the most so face phys indicated traders at the expense of you. this is no longer the s.e.c. of arthur leavitt. he was one of the greatest

s.e.c. chairman ever, because his mantra was to give the little guy a break, to level the playing field, to make the market safe for the individual investors. leavitt favored regular retail investors over home gamers like you over the big institutions, particularly hedge fund, because he knew the big boys didn't need protection. they have all kinds of money. but under the reckless laissez faire anything goes bush s.e.c., that changed. i think the obama administration so far has hardly done anything to roll back the damage. the s.e.c. has proved all kinds of things to make it less safe for you. all the changes that have made the market faster, allow them to ping each other, the etfs of mass destruction allow them to evade the margin rules, bring etf selling power or buying power to bear. they repealed the uptick rule, which protected us from endless short selling. the s.e.c. either approved or enacted all of these things that made the market more dangerous

and more difficult when things get bad and will do so again when we get that kind of quick, sharp decline. so if you expect the s.e.c. to have your back, think again. if you think the exchanges have any interest in maintaining legitimacy of our stock markets, not so much. you've got to understand, the exchanges aren't on your side, because they're whole bias is to allow the big institutional hedge funds to make lots and lots of fast trades that each generate a fraction of a penny in profits. the old days the new york stock exchanges and nasdaq were organizations that could police themselves. now they're for-profit public companies and their goal is to make money. nothing wrong with that. but we're living in a very different investing world than we were a decade ago and the s.e.c. doesn't seem to have noticed. until we get someone on the s.e.c. -- let's look at this through your i.r.a. a right to have double or triple etfs without regard to what it can do or how bad it is. you should not be surprised by any kind of outrage. this also means that you have to protect yourself.

yourself from the madoffs of the world, for instance, who offered too good to be true performance. the s.e.c. we know now isn't equipped to find or spot these people. or maybe it's in bed with the wrong people. maybe it's examining the minor players instead of the major ones. if you give your money on money manager demand reports from where the manager keeps his master account. be sure you can deal directly with the money manager's account. he won't like that, i don't care. don't give money to a money manager where he puts it to work in something it doesn't have, an easily accessible price. you never will be putting that mortgage-backed junk that burned so many investors. if you don't find the price on yahoo! or cnbc.com, i want you to take your money away from these people. listen to me on this. i know! here's the bottom line. the flash crash, financial innovation, more like a battlefield innovation, second world war i, where the technology vastly outpaced the ability of humans of new found fire power, stocks that trade like commodities, move them.

makes no sense whatsoever. these are now the normal. because the obama s.e.c., like the bush s.e.c., isn't watching the store. we don't have to like it. we better get used to it. stay with cramer.

i've said it before. i have the smartest viewers around. so let's hear from you with some of the tweets you've been sending @jimcramer. that cool avatar with my pop. first, why limit orders only? got to be a good story to go with it. yes, let's say you had a sell order in during the flash crash and we know flash crashes are no longer going to be isolated events. well, if you had a market order, and it's entirely possible, let's use procter & gamble, at 60, went to 40. it's entirely possible you sold at 40. they can give whatever price

they want and then bounces back to 60. if you put a limit order, sell at 59, boom, you're out. sold at 59, can always buy back at 30. it's about flash crashes. that's why. it's about wild markets and taming them with limit orders. our next tweet is fantastic. at fitted hat day writes, it's true. @jimcramer called me ought for yawning when it #georgiatech. that's right. i can't stand yawning or sighing. just go home. take a nap. but i always approve of our staffs voracious hunting through the archives. nobody does it better. >> no more yawning, man. i used to fire people at my hedge fund when they yawned. made them walk around the building, they come back again, they're fired. yeah, look, i've been sweeter and kinder and gentler now, and someone on the staff yawns on "mad money," i say, listen, go get me a soda or diet coke.

no longer trying to fire people. but i think i will. anyway. here's another -- i'm not kidding. that means sighing is even worse. here's another tweet from @zander 318. does the volatility index belong in my portfolio. your portfolio is about owning companies, shares of companies. don't complicate with it with risk on, risk off stuff. own stocks. this next tweet comes from @garc108. let me get this straight, on wall street, roll up the sleeves, when cooking and cleaning leave them down? yeah, i like to dress up. that happened to be ellen haley's day off. it was mother's day. someone has to take up the slack on mother's day. it might as well be cramer. my eggs are good. everybody was -- it was a good day. let's go to the next tweet from @sjeppley.

i've got a year left of college, what would you recommend to do, aside from hitting the books hard. this is real easy. have the gosh darn time of your life. because i've got news for you. every day from then on is work. a lot of these kids think college is work. that is the best time of your life. everyone looks back, don't waste it working. here's another tweet. this one comes from @krauseas_ec. boo-yah from ecuador. your national borders, watch you every night. great show. if you can tell me the analysts watch me at the galapagos, then i know i've got reach. let's keep them coming. no, let's stop. because we're out of time! you know what, on the yawning guy, i've got your picture, i know where you live. i'm coming for you. stay with cramer.

i like to say, there is 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. see you next time. >> he's been called the toddler ceo, the boy wonder who created facebook. you're not a harvard alum. >> that's true. we don't have a setting for dropout, so... >> what's the difference in $5 billion and $100 billion? i know it's $95 billion. >> a lot of cheeseburg