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 trying to save you money. my job is to educate you. call me at 1-800-743-cnbc. up day, down day, flat day. there's something you need to understand. investing can be a lot like comedy. in both disciplines, timing is everything.

perhaps the similarity is where on occasions people call me a clown, a joker as long as it's not a midnight toker. maybe they are actually complimenting my keen sense of timing when they compare me to bozo and krusty. the joke is on them. when it comes to stocks, getting the timing correct, knowing the right moment to buy, right moment to sell among the most difficult and frustrating parts of managing your own money. so many times when i see you, i'm solving it tonight. it is demanding. precision is tough to get right. so many commentators say it's impossible for individuals to time the market. there is a whole cottage industry of naysayers who make a living telling you there is no way a regular investor can do it. you might as well give up on trying to trade, give up on picking your own stocks and just put all your money in an index fund that mimics the performance of the market as a whole and leave it there for all eternity.

i've got nothing against index funds per se. they can be a decent way to make some money in the market if you don't have the time or the inclination to manage a portfolio of individual stocks. many people don't. the argument it's the only way to go, that's bogus. we all have made good money buying individual stocks or know people who have, or you would not watch a show devoted to trying to help you invest yourself. that success is denied if not denigrated by all who proselytize endlessly. if you came in and bought the generation of the bottom markets in 2009 when the s&p traded below 700, made out like a bandit. how important is timing? with the s&p at top in 2007 you lost more than half your money in about 18 months. eventually you made a decent chunk back but that can take ages to recover from.

of course what the dow jones average before europe ruled the roost in april 2001 and panicked in 2011, you saw 20% of your capital erased. these are extreme examples. they happened enough recently to be considered regular occurrences. they certainly get my point across. timing is everything if you want to make money. last i looked, that is a very worthwhile objective. not trumped by the demand that you go into an index fund. timing or at least how to better time investments is something that can be taught. that is what i do. it is my mission in life to make you a better investor or a better client of a broker which i also like. instead of being self-directed. i am going to teach to you do a better job of timing your moves by avoiding common mistakes and absorbing crucial lessons i picked up in over three decades of trading.

let's get right to it. one of the reasons timing the market is so tough is that the moments of greatest opportunity when you should be putting money to work, investing sideline cash, switching from bonds to stocks, are often also the moments of the greatest terror and angst. they tend to be the exact hours or even minutes when everyone is telling you to get out, and all of your instincts are screaming that you should panic. i understand the concern. it's a heck of a lot easier to say i would sell something here when everything is going down than say wait a second. it's time to buy. no one is going to remember you as a hero if the market reverses and goes right back up. you will be regaled as a goat if it keeps going down. especially when twitter and youtube can keep anything live, in context or out of it. you can say sell and the market can go up the next day. people don't even realize the next sentence is if you're up and you've got a triple. the most frightening moments, the days when you're freaking

out when markets are being clobbered, those days are never the right time to sell. there will come a better time when the market lifts a bit. if you think it is too ugly, try this strategy. just reverse all your thinking. pick something to buy, not sell. do it small. you don't have to be heroic. you also don't have to join the herd breaking down the doors on the way out. nobody made a dime panicking. it is an awful strategy, if one can call panicking a strat by. i know i don't believe it's a strategy. let me put it another way. often because you don't like a market that doesn't mean it's the right move to sell. only once in my career was it ever right to blow out all your stocks, trade and sell to epic proportions while others panicked left and right. every other time selling was wrong and buying was right. remember the sequestration scare? the u.s. bond gap. debt ceiling debacle. japanese nuclear crisis. 1987 flash. i'm that old. panic selling has not been the smart thing to do in all those cases. what worked was prudent buying.

in many cases it worked big. the only time panic made sense was selling in 2008. the financial institution was on the brink of the collapse. that's when you had to take it off the table. that was a systemic crisis. panic, even in the midst of a nightmare sell-off, made plenty of sense. which is why i told to you sell. then i went on the "today" show, october 6, 2008. >> what is your advice today? >> whatever money you may need for the next five years, please take it out of the stock market right now. >> yep. when the whole system was in jeopardy, only time since the great depression buying actually hurt you. stocks kept falling and falling. good call. you never got a chance to unload the merchandise you bought on the dip at a higher price. that is the only time. that one instance. once in 80 years. i don't expect that to repeat

itself. october 2008 i was heavily criticized for what i said on that "today" show, telling people to sell into a sell-off. i was chided for yelling "fire" in a crowded theater. my response was the theater was burning. in 2008 and 2008 only, quick, almost immediate selling was the right move. the theater was on fire, the market was headed down huge. almost in a straight line. it was smart to sell, even when we were already several hundred points down. basically the market kept falling. getting back in was tough. you managed to sidestep the decline of 35% if you took action. of course it was better to heed my september 2008 sell call. where you dodged an almost 45% decline. that was done in a less dire moment. they are among the proudest hours i have had in my many years of "mad money" yet they are forgotten. i get that. maybe that's good. that kind of selling is not an appropriate takeaway unless the whole system is in jeopardy. as i tick down all those other

proximate causes, they ended up being moments to buy, not sell. every other time, you could afford to wait or you should have bought into the panic. how about timing within the sell-off? i find on day one of a vicious decline, hold your horses, please. stand pat. you've got to be patient. patience doesn't come easy. wait it out a bit. preferably until we declined 5% to 7% from the highs. that's where i start buying. that's been my rule of thumb and historically a prudent place to begin your purchases. what happens if you go the other way? i've seen what happens when you proclaim sell, sell, sell and get it wrong. a huge reckless hedge fund was collapsing, threatening to bring down several other institutions. i wrote a column for the online publication called thestreet.com

titled "get out now." i was advising people to sell to an intraday downturn. the fed didn't understand the gravity of the moment and was ignoring potential crisis that could spin out of control. what happened? within one hour of that piece's posting, the fed held an emergency meeting to cut rates and the market rallied right back in my face. it was a terrible moment for my old hedge fund, magnified by the article. that is a moment i wrote about in "confessions of a street addict." it was the perils of panicking. in 1998 i was dead wrong. read it. people still pen about that chapter on twitter and the lessons learned from it. if you took the other side you made fortunes. i'm pointing it out not to say i'm an idiot, but to say it happens. i radically reversed my stance the same day, but it was too late. i had to pay up huge for the same stocks i'd sold. i still feel the scrambled eggs on my face from that call. do not sell in the midst of an awful decline.

that's just bad timing. keep your head, because you will get a better moment to sell. in all my years of trading, panic has only been the right response to a sell off once. systemic problems. every other time the right move was to buy into weakness. remember that, and my story about getting it wrong, the next time we get a horrible pullback. believe me, it will not be systemic like it was in 2008. paul in california, please. >> caller: this is paul from rancho santa margarita, california. first of all, i just want to thank you very much for all your help and research. >> thank you. >> caller: you've really helped my family. i appreciate it. >> thank you. >> caller: you always say to use limit orders. >> right. >> caller: if i've been watching a stock and tracking it constantly, and it finally hits the buy price that i want, wouldn't it be smart for me to use a market order if i feel it's gone down, or do you think i should wait for a limit order price?

>> you have to wait. let me tell you why. some of the big declines we've had have been so fast and breathtaking you'll get a report you bought a stock at $20 and the stock will be at $15 because the machines went amuck. until the government rules all this financial engineering that caused some of these quick down turns has to be banned, i can't countenance that kind of order. let's go to mark in florida. >> caller: thank you to you and your crew. they are so fantastic. >> they are good. >> caller: my call today is on options. i hear all the time on cnbc and sometimes even on your show that options for a particular stock are expensive right now, or they're reasonably priced right now. how would i know when options are reasonably priced or expensive? i'm an action alerts subscriber. i read all your books but i really don't remember this being discussed. >> i addressed it "real money"

and in "getting back to even." it's a great question. thank you for subscribing to action alerts, that's my charitable trust publication. what i like to do is look at how many points over. you take the option and look at what's known as the premium, how much is over if you backed out the price of the stock. if it's very high and the expiration of the put or the call is happening in a very near short of time, you know it's expensive. you have to measure the premium. the premium can be too big, and that's when you have to avoid it. you've heard it before. timing is everything. it's especially true when it comes to investing. in the face of a sell-off, please, no panic. time is on your side. take a breath. relax. keep your head. maybe buy. time is money. i got a lot more coming up. stay with us. don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer #madtweets.

send jim an e-mail to mad money @cnbc.com or call 1-800-743-cnbc. miss something? head to madmoney.cnbc.com.

when to buy, when to sell? all about time. you can have the best stock picks in the world and it won't mean a thing for your portfolio if you didn't have a good sense of timing. i'm a big believer that ordinary people, nonprofessionals can manage their money as well as the pros, sometimes better. that's why i come out every night to coach and teach. despite what you heard from the naysayers, it's possible for a regular person, somebody with no wall street background, to beat the market and outperform the benchmarks as long as you know what you're doing, as long as you think like a disciplined investor rather than a gambler. if you're willing to spend that time, as long as you're devoted and inclined to learn about stocks, my experience is that

you will most likely beat many money managers and take taxable gains and losses when they suit you, not the manager, a very important issue considering the importance of taxes and long-term performance. right? a huge part of knowing what you're doing is having decent timing, or at least knowing enough to make, not to make bone-headed mistakes about when to buy and sell. that's why tonight i'm going over some of the most frequent errors investors make to steer you on the right track. it's easy not to make mistakes when everything is going your way. when everything looks like it's falling apart and the pressure is on, that's when people tend to screw up. for example, if you get caught owning too much stock into a hideous sell-off versus how much cash you have, something the pros call having too much exposure. it's horrible. the worst part is not knowing whether to blow out of your stock or hold tight. you know what else is extremely

dangerous? the propensity to take sweeping, drastic action all at once. when it seems like everything is going wrong and you know the economy and the market are getting worse, you're dead certain nothing good can happen, here is my advice, take a breath. hold it. don't do anything crazy. i would say meditate or do yoga, but i am a down dog that ruminates how bad things are instead of concentrating on my breathing. even if you own too much stock and want to lighten up, resist the urge to sell everything. that is bad timing. i always tell you never to buy or sell all at once. it's pure arrogance to assume you can time your trades that well. you can buy or sell by increments. if the stock you bought goes down, you can buy more at a lower price, if it goes higher, you can sell more to take advantage of the higher price. that rule applies to more than just individual stocks.

it applies to your whole portfolio. you should never sell anything all at once. what is the right move? here is the crisis playbook for dealing with the moments when the fundamentals are deteriorating right in front of you. first, you can't sell everything but you have to sell something. not everything you own is equally good. some of it might be pretty darn bad. here is my rubric for what could be sold. big profits in the stock? don't give them back. that's when you have to remember this. sell. you have something where the fundamentals have changed and the story is going against it, blow out of that stock, people. you have something you think going lower, even just short term? sell a little, please. just do it. that's fine. you can always buy it back lower. do not sell it all. that is just plain stupid. don't ever blow out of everything. don't give up on stocks entirely and hide in treasury bonds or cds with puny yields. instead, when things look dire, redeploy your capital in stocks

that are selling off. use that money to buy something you really like. this is why not in the heat of battle but the calm at the end of the week i rate all my stocks for my charitable trust actionalertsplus.com. one being the best, four is the worst. i swear this ratings system will help you. i pioneered it and it is on display in every bulletin we send out all day. it's a proven game plan that i have used for three decades and it never steered me wrong. the ones are the top flight stocks. you buy more in pure moments of chaos. you've been ready, you've done the work, you know they are right for the occasion. fours are the expendables that you sell when things turn awful. you just don't get emotionally attached. don't get attached. the threes are stocks you wish were higher before you sell them.

they can be sacrificed if you need to raise cash for ones. don't wait for them to get back to even if you can own something else that is likely to go up more and quicker. twos i like to wait for a 5% to 10% pullback from a high before i pull the trigger. why not sell it all when it seems like the market is turning against you? american stores. don't remember it? it's the old acme, my favorite supermarket when i was growing up. i owned american stores throughout 1990s in my old hedge fund, always betting one day it will be taken over. that it was worth so much more than it was selling for, time would be on my side. one day we got a really brutal sell-off and i couldn't stand the pain. i got goldman sachs, picked them up on the phone and said buy my whole book, meaning they took me out of all my positions. what they did was they stopped me out down 2% from where they were. they agreed that i would get the proceeds only down 2%. you could really do that. you could literally offer everything you had and they

would buy it on the line. including that package i sold to goldman was american stores. it was so ugly i didn't want to own anything, including a stock i had owned forever. a big institutional trader like i was can get goldman sachs to buy your portfolio at a discount. knowing that if you sold them you could crush your stocks and do more damage than goldman or any big firms can do by going at it piece meal. it was what i thought a prudent decision. two weeks later, after i sold all my positions, albertson's bought american stores. it was a huge premium. gigantic. i couldn't believe it. i had held on to american stores all these years and like a chump i sold it because i couldn't take the pain. if i had added to the position i could have made my year. i always remember that moment, because it caused we to rethink how i felt about blowing out of my portfolio when i'm convinced stocks are going lower. the stock market bottomed down 2%. i didn't have the guts to go back in at the time because i was so adamant that we were going down 4%, 5%.

what is the moral? what did i really do wrong? selling something wasn't a bad idea. the pain sometimes becomes too unbearable. you have little to no cash on the sidelines. selling everything, massive mistake. it's always good to use a top notch futures-led sell-off to pick at, not load up on, your ones. that's your favorite stocks after the sell-off ends. they always end at some point. not all of your stocks will bottom at the same time. if you rank them, you probably won't even care when they bottom. the best ones will get put on sale along with all the other merchandise, the good with the bad, the wheat with the chaff, and the dross, for that matter. selling everything, getting out all at the same time doesn't leave room for the possibility things can and they might get better quickly. doesn't leave room for the next american stores. it just takes you out of some of the best stocks you've been waiting on. it's awful timing. here's the bottom line, time warps our feeling about stocks.

never trade like it's the apocalypse. never sell everything all at once. go to the supermarket of stocks, find what you want to buy on weakness. i checked out the most important stock i liked in my zeal to get into that ten items or less line. because of my haste, my overwhelming bearishness, i missed the huge american stores buyout along with the rally that followed soon after i left the store. do not repeat my mistake. after the break, i'll try to save you money. of

with apologies to the great carole king, it's never too late. not to what you own, anyway. knowing what you own is more important than ever now. we live in a world where too many people never met a disaster they didn't like. they are all equal these days. press will go into disaster mode. hurricane like. the more sensational, the better. everyone is addicted to it. it's a fact of life. every geopolitical issue, every weather issue, every story of crime and punishment gets whipped onto a frenzy and fans

the flames of panic. even the genuine catastrophes are treated like they're the end of the world, like it's apocalypse now. every negative story will be exaggerated to make it seem as though it's the end of the world as we know it, or like we are on the eve of destruction. a la barry mcguire targeting the older demographic, older than carole king. we have to accept this overreaction is part of the sea change the way the business media and market work. you can't shake it. they want to shake you out about anything you want to own or might want to buy. at times we seem unable to secure ourselves against the media's gloom machine. instead have unlimited pessimism over all outcomes. how many times have we seen this happen? the market sold off based on instability in egypt and war in

cyprus, the tragic earthquake in japan and the sovereign debt crisis in europe, which i think is mercifully over. what should you do during these types of scares? what's the right way to react in this kind of crisis? these terrific, nonsystemic risks, meaning the banking system in the u.s. is not about to go under, these can make terrific buying opportunities in the right stocks if you get it in your head. how? let's figure this out "mad money" style. using the method i would employ in my hedge fund i no longer work at and am retired from. the futures that would overwhelm the market. first we had to put the event in perspective. the news is potentially tragic. it almost always is. can't ever make fun of it. it is potentially really dangerous. not something to make light of. potentially terrifying. what effect does it have on the numbers? we are about the numbers in cramerica. in the 20 years i invested other peoples' money there were exogenous events that hit the stock market. i used the bristol-meyers theory. named after the company that had

the most consistent earnings imaginable. here is how it would play out. we used to have morning meetings at 6:00 a.m. at 6:01, get the heck out. go home. since the moment of opportunity had already passed. i sent you home if you were a minute late. they were lucky i didn't throw water bottles at their backs. i saved that for when they lost me money. every time we got one of those nasty events, somebody would say what are we going to do now the nuclear power plant in chernobyl, what do we do? iraq invaded kuwait. what do we do? i would say call your mommy. i would scream back dripping with are sarcasm and arrogance, what the heck does that have to do with the price-to-earnings ratio of bristol-meyers? the answer is nothing. first thing i always did when i heard or saw one of these big scary events was to make a list of the equivalence of bristol-meyers. at times it seems like we get terrifying new crisis every other week.

develop your own list of bristol-meyers name. maybe it's a high-yielding food stock. maybe it's verizon, another steady eddie company with a big dividend. southern, duke, i don't know, be ready, find something you like and get ready to buy during a marketwide sell-off based on some exaggerated crisis that won't hurt the earnings of verizon, pinnacle, southern, duke or general mills. is this event really bad for all the earnings out there? when the egyptians were demonstrating in the streets in early 2011 and then demonstrating again, trying to kick out a dictator, there was a moment when even the oil stocks, which benefited from higher oil prices got knocked down along with everything else. doesn't that make no sense whatsoever? that was a tremendous buying opportunity. if you bought the oils, that's what you had to do. same with the overthrow of the elected but disliked egyptian

leader in 2013. egypt gives us a lot of sell-offs. it means that when oil comes down as part of a worldwide decline in commodities because of unrest, if it threatens the oil price to go higher, you've got to act. you have to buy. there are some big scary crisis that threatens to knock down the whole market like sequesters, unrest in brazil or egypt. remember to ask, what does this event have to do with the earnings of my stock before you sell. maybe you feel like buying one of the areas that is an opportunity that is being brought down by the particular event. bottom line, there will never be a shortage of terrifying events around the world to bring down the whole market. next time it happens, don't run away. there might be an opportunity for you to make a very, very big profit. vince in maine. vince. >> caller: thank you, professor cramer, for all you do for us. quick question on what makes stocks split and what do we do when they do? >> this is such an interesting question. people always get it wrong. it's up to the ceo and the

board. there is no rule. some companies go to -- look at berkshire hathaway, 150,000, 100,000. it's up to warren buffett. companies have to decide whether they think it makes their stock more attractive to individuals or does it make it more attractive to hedge funds, which they typically don't want. i am in favor of stock splits because so many of our viewers don't want to buy stocks in the high dollar amount, even as i know the truth which is if you take a pencil and snap it in half, you don't have two long pencils. this is the same thing. it's cosmetic. in this market, it's working. patrick in arizona, please. >> caller: hi, jim.

when you have a stock that's had a good run, we of course take some off the table. >> right. >> caller: but if it's one of our stocks we really like long term, what is the plan to get back in when there are no pullbacks? >> i've got an answer you're not going to like. that happens, you missed it. one of the great things about this market is, you always know there is another train coming to the station. one of the things people don't want to do is say, you know what? i missed that one, or i blew it. sometimes you've got to own it. charitable trusts, we can't buy that one back. it moved too far. that's what happens. got to wait, or never. john in new york. >> caller: jim, good evening, this is john from new york. i have a quick question for you. i own a stock, i made money with it. i'm looking to take my money and put it into something else. is it best to take one stock with that money or two good stocks? >> depends how much time you have. one of the things that i try to say over and over again is if you have no time at all, then you should just be in a mutual fund. there's good managers out there. we have a lot of good managers that come on to cnbc.

if you have some time do one stock. if you have a lot of time, you can do a whole bunch. if you don't have a lot of time and you can't monitor, buy one stock and look at it as frequently as possible. a good investor knows what she owns, period. it's more important than ever in this crazy world, with the hyperconnected, disaster-loving world, when something terrifying happens, i don't want you to be panicking your portfolio. it could turn out to be a buying opportunity. stay with cramer.

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time after time, timing is everything. a stitch in time saves nine. whatever trick you use, please remember this, i am teaching you timing your buys and sells can and should be done and those who say it's impossible, they simply want to keep you in your collective chains. consider me a bolt cutter setting you free. i want to talk to you about a kind of chain you need to be unshackled from called the ipo chain. i like ipos. it's been an amazing period of

time. we've had so many great ipos. we do our best to try to analyze them for you on "mad money." they are not easy to do. often you call and ask me, is x, y, z ipo a good one? it depends where they bring the deal. authentic wall street gibberish for the price of the offering for the amount of shares to be offered. say there will be 50 million shares outstanding. banks are talking about bringing the deal at 20, $20 price times 50 million shares. bankers can do a lot of different things. they don't offer all the stock there is. insiders, venture capitalists who fund it might own a lot. whoever seeded the company will have substantial amount of shares left. the $20 ipo price may be just what's called the price talk, meaning what the initial price they're thinking about bringing the company at, not the last price. if demand accelerates, you're going to hear the price move up maybe to $25, maybe to $30. obviously that values the company at a much more rich level.

you might not like it at $30. you'd accept that with anything other than ipo. accept it for an ipo too, please. layer on a third variable. bankers if they want the stock to pop. if they want to generate what's known as a hot deal, one that immediately goes to premium after it opens, they can hold back stock. say they have 50 million shares outstanding. after canvassing the buyers to get indications of interest, there might only be demand for 10 million shares to be sold at the offering priced $20 a share. they issue 15 million shares. the stock will wallow. the opposite is true if they cut back shares, bankers are experienced. these syndicate managers can manage how much of a pop they want simply by cutting back the shares they offer. demand for 10 million shares at $20? then just offer 5 million shares, only 1/10 of the shares outstanding.

that cutback will generate real excitement when people get their allocation, or the number of shares they are given versus the numbers they asked for. that's what makes for a hot deal. if the bankers have demand for 10 million shares and issue 5 million, everyone will be cut back who wants the stock. the allocations will be well below what we are hoping for. that is how hot deals are made. i happen to call these kinds of offerings sliver offerings from the days we brought public at thestreet.com. they did just a sliver of it. saw a lot of them a few years ago, too. they create a wild pop because bankers choose to make the deal hot, perhaps to create hot, perhaps to create excitement for the stock. if they created more stock it could go below where they priced the deal. nothing is worse than what is known as a broken deal. one that immediately goes below the offered price. it hurts shareholders who bought

and hurts the company. better off to get people excited and then six months down the road when what is known as the lock-up expires, hopefully the stock will be well above where the ipo was priced. insiders will get out at a big profit. i don't care about the insiders. i care about you. i want you in on sliver deals. any deal where new company offers less than 10% of the company is one i want you in for even if i don't like the company. let's take groupon. i'm not a huge fan of this kind of company in general. this company improved its prospects dramatically with new management whom i like very much. they can and have done great things for retailers. i'm already tired of my daily groupon e-mail offering. i don't want to go ten miles out of my way to save a little money. but groupon, the ipo, let me in. there are 640 million shares of groupon. the bank offered only 40 million shares. that sliver of an offering almost ensured demand would exceed supply.

the company raised $700 million, received a gigantic valuation. needless to say, they only made out like bandits if you sold when the selling was good. that was the first day of trading. if you bought at $28 where it opened, you didn't have that much room for error. you could have made 2 bucks. after that it began a slog down that was impossible to reverse till they saw fit to release the errant ceo. it's been a buy ever since. what was the right thing to do? follow steve miller's famous edict and take the money and run or fly like an eagle. brokers don't like to encourage flipping, which is putting in for a hot deal and banging out. i'm not your broker. they may not condone the practice. i say why not? you do a lot of commission business, you do fee business, you put in for a sliver deal, why can't you take the pop? where does it say that you can't? unshackle yourself. here is the bottom line.

sometimes there are only two decisions we make, put in for a sliver deal and sell it for the pop. you time the sell to the very open. please don't stick around for one red-hot minute longer. never, never, never buy in the after market. it's for suckers. be smart. take the money and run. stick with cramer. [ male announcer ] for every late night,

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not every stock can be owned forever, period. none. and there are very few stocks that you should own all the time. year after year, decade after decade. the fact is, if you don't know what would make you sell a stock, then it's not okay for you to buy that stock. lots of people end up selling at the wrong time because they never anticipated selling at all. they just figured that's never going to happen. they only thought about what they wanted to buy. they didn't have what i call an exit strategy. as your investing coach, i need you to make sure you don't make that same mistake.

i need you to develop exit strategies for your stock. how do you time yourselves? there are many stocks when you buy them you need to understand some day soon you will have to sell. high-flying tech stocks, these things are like they blow at the wind. they can be obsolete almost immediately. it's simply not safe to own them unless you recognize that they can't be owned forever. eventually you'll need to ring the register, take your profits when you have them, before they slip away. that's why warren buffett never owns any tech stocks. the same goes for smokestack industrial companies only make money when the economy is healthy. cyclicals are hostage to the business cycle. you have to sell them at the first real sign of a slowdown. you do. you can't ride through it. a lot of this comes down to understanding what you own and being able to change your mind. tech stock is not the same as a staple like pepsico. the first of these pairs are tech names, trading vehicles that can fly and crash.

the staples can plod along slowly forever. a trading vehicle can make you a lot of money in not a lot of time but you have to take the money off the table now and then. if you let it ride that vehicle will eventually crash. could drop 50% in a matter of days. a staple like altria can be owned long-term. that doesn't mean nothing will go wrong. management can still mess up. somebody could legislate tobacco. it's unlikely the stock will fall off a cliff. i've got to be willing to change your mind and ready to sell when it's time to sell. tech stocks that are winners when a product cycle is strong, like smart phones, pcs are losers when the economy is weak. smart phones can make you a lot of money when time is good. it can get you annihilated when business isn't hot. the only exception if there is no cycle, no cheerios cycle, no hershey bar cycle. we don't talk about people using more kellogg frosted flakes in the fall and spring. there is no seasonality. take the dotcom run from march 2008 to 2010. if you sold it you would have

made a fortune. you had to buy all the parts and equipment makers because the dotcoms and telco carriers were expanding. they are buying equipment like mad. right up until the demand fell apart and the buying was canceled. you had to keep owning these stocks. if you didn't sell by march 2000, you were blown out. you had to buy and then you had to sell. i tried to teach you, you have to change your view when the facts change. i'm criticized that is not the case. that is. i don't want you to end up like the victims at the dot-com bomb. sometimes that means selling something even though you bought it at a higher price. facts have changed and business has gotten weaker. it's okay to take a loss on these.

all you want to do is live to play again. often these shooting star tech stocks will get hammered at the first sign things are deteriorating. don't tell yourself it's too late to sell. it's not. they can go lower. use any intraday strength to lighten up. your first loss is your best loss, like i tell you in jim cramer's "real money." this is where discipline makes a huge difference. i am tireless in telling you not to be greedy. saying you have to take something off the table and play with the house's money. i endlessly tell you it doesn't matter where a stock's been. you don't want to own a high-flying tech stock that lost its momentum. when that happens, sorry. just got to sell the darn thing. if you love it, buy it back lower, when business is improving, not deteriorating. don't treat risky trading vehicles as though they are staples that can be owned for ages. handle them with care. they are third rail names.

take caution and you can do very well for yourself. remember to take profit on the way up and get out on the way down. you don't call the top to good make money, be willing to jump ship when it's clear the stock is peaked and the business and you are ready to head down. stay with cramer.

we've got to get to some of these tweets you've been sending me. our first tweet says i'm trying to buy small regional bank with no volume and want to use limit orders. tips for getting in on no low volume stocks, don't do that unless you're buying 10 shares or 100 shares. what i just talked about with the exit strategy. it's difficult to get out of those. you can go put a limit order, but nothing bigger if there is no real market. it's not for you. now to blood diamond, who writes, when you're not on squawk on the street, mad money or twitter, life isn't the same. i'm am hash tag addicted to jim cramer.

i often need a vacation and don't take them. see me at the shore periodically. that's how i come back and i'm all recharged. our next tweet comes from an early bird show. this one says following, can you talk about the preferred stock market? look. preferreds are another form of capital, there's corporate bonds, preferreds, stocks. i like the preferreds in getting back to even i talk about bank preferred. that's the best thing i ever know about preferreds. how much do you sleep average a night? what keeps you up all night? unfortunately, i have a sleep disorder and i have at least two or three nights a month that i don't go to sleep. most nights i go to bed between 11:30 and 12:00 and i get up 3:30 to 4:00. i know. last night was three hours. would you explain how a contrarian will use williams r

to buy stock on a pullback? thanks for all you do. i'm going to refer you to realmoney.com. he knows it better than anyone. i like to say, stick with cramer.

i like to say there is a bull market somewhere. i'm jim cramer and i'll see you next time. welcome to "worldwide exchange." i'm carolin roth. here are your headlines this morning. the global rally continues. european equities trade higher with the dax hitting a new high after another record close on wall street. abe nomics in full flow, japanese inflation runs at a five-year high while factory outputs decline for another straight month. u.s. retailers are hoping for many happy returns from the holiday shopping season. the head of the national retail