>> i think micron. >> i want to know if you think it is rigged. >>er you know the expression. >> five in a row? final trade. >> netflix will get you done. >> i'm melissa lee. see you here tomorrow. "mad money" starts right now. 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 save you a little money. my job is not just to entan but to kaech and coach you. so call me at 1-800-743-cnbc or tweet me @jimcramer. nobody. i repeat nobody likes to be disciplined. they don't like to be admonished, and they don't like to follow the rules.

i don't blame them. i was a rambunctious kid myself when i started managing my own money, and at first i didn't know the rules. then when i learned them, i spurned them either because i didn't believe they could help or because they cut off my upside. even if they cushioned the inevitable downside. in other words, the rules kept me from making a huge amount of money when things were going gangbusters, in order to keep me from losing big money when things went badly. >> the house of pain. >> the rules i'm discussing tonight keep you in the game even when things are tough and you make those mistakes. the rules protect you against your own bad judgment about what's going on in the companies you own or whatever is happening in the market overall. but if you are going to make money using stocks because you just can't get much of a return anywhere else these days -- that's much much the case -- you're going to have to work harder with your money to do so.

and that requires discipline. discipline. because once you start buying and selling stocks, you can make more mistakes than if you just do nothing with your money. but if you do nothing with your money, you'll have a whole lot of nothing to show for it. that's why we are doing a show tonight on how to trade and invest responsibly to make your money work for you. how to tend it, how to make it grow. we're kind of gardeners of money tonight, how to keep it going through what we call active money management. it's not a sin, and a lot of you practice it. i want tao do it right. before we dig into the ways to make your money grow by being hands on about it, i want to delve into a little psychology of stock ownership. one question i'm asked repeatedly when people stop me on the street -- you know, i go back and forth from the street to "squawk on the street" and wall street, or they ask me @jimcramer on twitter is, don't you worry about your stocks? now, it is true that i don't own any individual stocks. i invest just for charity with

all profits and dividends given away to charitable causes. more than $2 million since the time i set up my charitable trust. but believe me, i still worry as i want to be able to give as much money to charity as i can. plus i disclose everything i own and telling you what i'm going to do before i do is it part of the bulletins i do for action action. you bet i'm concerned. it could be down right embarrassing when i get it wrong. yep, i'm always worried about the trust stocks, especially when they go down. i am doubly worried when te go down when the market as a whole is going up. that's a sign to me that something's wrong, that someone knows something i don't know and that i better find out or i won't be able to take advantage of the weakness to buy more. i'll have to sell instead. that's the we've reason why i'm always bugging you about reading the news releases, going over the conference calls, particularly that part right before the q&a, the guidance, and going to the websites for more information. you can't be informed if you don't try to inform yourself. i know that those who don't know

what they own and can't articulate what they own and don't know what a company makes or sells don't know why it would be going down either. so they don't know whether to buy or sell into a big selloff. however, we are talking about psychology here. the psychology of the mind when all that homework doesn't pan out. believe me, it is frustrating. when we select a stock on the show to highlight, we do a mass amount of work on it every single time, the same amount i would do at my old hedge fund if not more so. it is really difficult to see it go down, but there are plenty of times when there is, say, something you can't detect. chicanery in the numbers. there's plenty of time when there is puffing by management. i talk many times on this show about press releases that make things sound much better than they are. the ones that start by saying, we are pleased to report that sales increased by 12%, and it sure sounds good except the consensus of analysts was looking for 20%, which means with that 12%, you've got a

hideous shortfall. >> boo! >> or worse than that kind of puffery is when you own a stock and someone out there knows the truth and you don't. maybe someone found out about the truth playing golf with an executive. you know that stuff goes on. maybe some hedge funds paid under the table to get the truth as we've seen time and again for years and years, even as many of these hedge fund titans ended up in jail for doing it. in other words, the insiders had the call. you didn't. there are also tons of times where you simply own too much stock in the market versus what the market's going to do. we call this being too long. you are too long as the professionals say, and you can't buy any more stock on the way down because you're so out of capital, so you're going to lose money or at least on paper. or, worse, you were borrowing money to finance your portfolio, which i think is just a terrible idea. stocks aren't houses. you can't fall back and live in them if you have a mortgage on them. they just get taken away by the

margin clerks. >> sell, sell, sell. >> so what do you do? how do you manage a portfolio under conditions where things go wrong with the stocks you own all the time and things go wrong in the market all the time, wholly apart of what's going on at the individual companies in which you own shares? there are no magic bullets, but i believe that when in doubt, this one principle is key. discipline trump's conviction. memorize that term. difference penicillin trump's conviction. i stared at a yellow post it with those words for many years when i was managing money professionally to remind myself that things go wrong and you need to have a scheme to help you deal with those situations when things go wrong, as they inevitably do. yep, i put a discipline trump's conviction sign on my personal computer to remind me of what to do in the stock market when things go awry.

one of my best forms of protection is to recognize that if you're not tough on your own dedecision making and you like all of your stocks equally or at least pretend to like them all equally, you can't be flex im. you can't change up when things go wrong. that's bad, people. that's why i've come up with a system of ranking my stocks when things are good and times are placid as hedges against yourself for when things get tough. you know, when it's really calm out there, you can really do some good decision making. remember, not all stocks are created equal. when things go kerr flew which, you have to be able to circle the wagons just like a wagon west going out west in the 1800s, around a few good stocks. buy them down to get a better basis or average price for your holdings. why does this matter so much? because we must expect corrections and declines as a matter of course. more on that later in the show. we must anticipate the days where we wake up and we hear the good people on squawk box saying the futures are down. they're down a great deal, and the market looks to open down a

half a percent or down a percent. you've heard that so many times. we've learned so much over the years about what triggers corrections. more on that later too. the most fornt thing is to have a game plan where you know even though you've done all the homework and have tremendous conviction, discipline dictates you must assume there is something you don't know going on with your individual stocks or there is something happening in the world that is beyond the control of your acumen, and you're just being victimized by the events of the moment. my ranking system will indeed get you through the chaotic times, allow you to stay cool and methodical about your money when all others around you are fumbling and fretting and deciding they just can't take it anymore and just have to get out of dodge at the exact worst time. so here's the bottom line. in order to be able to deal with the decline in your stocks or in the stock market as a whole, you have to accept that something is wrong at the companies you own shares in that you might not know about or maybe there's something happening in the stock market that you didn't foresee. therefore, you must be ready

with a game plan that can bail you out short-term and keep you in the market longer term so that your money works for you and not against you in a time when you need it most. frank in new york, frank. >> caller: jim, i understand why a company goes public to raise capital for various different reasons, but why would a company want to go private? >> this is a great question. typically i want a company to go private because they think it's worth a lot more than what the stock market is currently paying for it. that is key. when you see a company go private, that is typically because the managers of the company recognize there's so much value and the stockholders and buyers don't. they take it private. they make it look better, and then they tend to bring it public again. how about ann in california, please, ann. >> caller: hi. i haven't seen any prospectus on stock splits lately, and i'm curious if there's any way to tell when a company is going to split their stock. >> no there isn't. companies tend to be very close to the vest about it. remember, when you split a

stock, you only get pieces, say a two for one split of the same company, so it doesn't necessarily create any wealth at all. it happens to be exciting, and i can tell you when stocks do split, some of the smaller investors then get a chance to buy that they didn't have otherwise. so i am pro-split, but it does not create any wealth, and they tend not to signal when it will happen. discipline isn't fun, but it is necessary if you want to make big money in the stock market. when there's a decline, you have to accept the facts and always have a game plan ready. i'll help you out. on "mad money" tonight, there are trades, and there are investments. i'll explain why understanding the difference will save you from a world of hurt. >> the house of pain. >> then headlines may be black and white, but investing on their every word could have you drowning in a sea of red. i'll help you spot the true story. plus a correction is always lurking around the corner. i'll help you protect yourself when it strikes. so stick with cramer. >> announcer: don't miss a second of "mad money."

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tonight we are going over the rules. the rules make it so losses can be palatable. rules that keep you in the game when others are freaking out. i used to talk about these rules all the time when i was managing money until they became second nature to me. but that was years ago now, and when i think about it, it's usually in response to a tweet @jimcramer that asks a question that the rules answer, and they answer kind of axio matically. that's why i got to dust them off here, make sure that people realize i'm not ducking their questions. i'm just looking for a better format to flesh them out than

140 characters where i can't be thoughtful. i want to be thoughtful on twitter, but it's really hard. this is the format. so here's a typical question. someone will mention a stock, an oil driller say, that has had a hideous decline. they will ask what do i do now? i often turn the table on the person, skg, why did you buy it in the first place? the followers tend to regard that answer as either arrogant or flip. but what i'm really trying to do is figure out if they bought it as an investment, which means it might be fine for them on a longer time horizon and they should buy more, or if they do it for a trade, and perhaps they should cut their losses. why does this matter? because one of my cardinal rules is to never turn a trade into an investment. if there's one concept you must take away from this show, it's that you must never, ever turn a trade into something it wasn't meant to be, a long-term investment. first let's talk about the process of buying a stock, the actual check down you must do before you pull the trigger.

when i decide i'm going to buy an oil driller, okay, i have to declare right up front to myself whether i am buying it for a trade or for an investment. what's the difference? a trade means that i am buying it because of a specific catalyst, a reason that will drive it higher. that the catalyst might be a data point, a recommendation, a belief that things are better than expected when the earnings come out or some news about a restructuring like we always talk about, a breakup into several pieces or some other material event that could occur. in other words, there's a moment to pull the trigger, a moment to buy. >> buy, buy, buy. >> perhaps because you think that oil is about to spike because of a shut-down of the spigot in russia or maybe some problems in the middle east, and then there's a moment to -- >> sell, sell, sell. >> -- when the event occurs and you're done. but you must declare first before you buy. here's why. the vast majority of you will buy a stock for a reason and then either the reason occurs and nothing happens to the stock, so you then decide, darn, i'll just call it an investment.

i won't worry about it. buy more if it goes down, or perhaps the reason never occurs that you bought it for, and you decide to hold on to it because, well, what's the worst thing that can happen? the answer, of course, is plenty and almost all of it bad. the answer is that you would never have bought it in the first place if you didn't think the reason was going to occur. so now there is no reason for you to own it in the first place. i have seen a myriad of investors turn trades into investments, developing a rationale or an alibi to fool themselves they're doing the right thing. that's because they don't make the distinction between a trade and an investment. if the reason i bought the oil company, higher oil prices, doesn't materialize, then i really can't say i'll hold on to it because it has a swell dividend. for all we know the only thing that would have saved that dividend from being cut is higher oil prices and without them the idea for the trade is gone and the dividend -- [ slashing sound ] >> when i want to invest in a company, not trade, invest in a

company, i buy a small amount to start and hope the market will knock down the stock so i can buy more at a better price. that's right. i actually, when i invest, want the correction, which is always the way you want to be thinking if you're trying to start a new investing position. ideally the stock is down already from its highs because you don't want to invest in stock at the 52-week high. but there's nothing like a nationwide, marketwide sale to get you better prices on your buys. trading is the opposite. i put the maximum on at the beginning because i believe the data point or the event is about to occur. i never buy anything for a trade without that defined catalyst. that's the word we use, catalyst. i never buy anything for a trade just hoping it will go higher as there could be no hope in the equation of buying a stock. i buy down, lower prices, when i'm investing. i cut my losses immediately when i am trading if the reason i am trading the stock doesn't pan out. that's why i like to say that my first loss can be my best loss. if you buy a stock for trade,

not an investment, and it starts going against you in a meaningful way, perhaps a decline of 50 cents is meaningful when you're trading, you may have a real problem on your hands. i'm not kidding. when it comes to trading, i am an extremely disciplined person to the penny. i like to cut my losses quickly and get over them quickly. that's why i say that my first loss is my best loss. all other losses tend to be from lower levels and at bigger cost to me if i don't operate on this principle. again, people, anyone watching, can instinctively feel the trade going awry but because of ego, pig headedness, they don't want to heed the thunder, and they stay in only to have to panic out at lower levels when the catalyst doesn't occur and the whole reason to own the darn stock evaporated. so please don't fool yourself. cut your losses quickly when you put a trade on and it starts to go awry. sure, there's an occasion or two when it's about to pan out and the market doesn't know it. but for the most part, it does, and you're probably going to be wrong.

it's just a fact of life. that's a compendium of all the studies i've made. the bottom line, never turn a trade into an investment. better just to take the loss because, believe me, the percentages say that you will most likely lose money. and if you do so, do it earlier rather than later and save some bucks. stop fearing the big score and start fearing the losses because it is the latter that can wipe out all those good juicy gains you have and then some. much more "mad money" ahead. a stock rising can be quite seductive but chasing doesn't always have a happy ending. i'll help you know when it's ever right to run after a hot stock. then corrections are as certain as death and taxes. don't miss my take on how to prepare yourself for the enestable. plus it's easy to get attached to your holds, but holding on for too long can burn you in the end. i'll let you know when to cut the cord. stick with cramer. ♪

hi, i'm frank. i take movantik for oic, opioid-induced constipation. had a bad back injury, my doctor prescribed opioids which helped with the chronic pain, but backed me up big-time. tried prunes, laxatives, still constipated... had to talk to my doctor. she said, "how long you been holding this in?" (laughs) that was my movantik moment. my doctor told me that mantik is specifically designed for oic and can help you go more often. don't take movantik if you have a bowel blockage

or a history of them. movantik may cause serious side effects, including symptoms of opioid withdrawal, severe stomach pain and/or diarrhea, and tears in the stomach or intestine. tell your doctor about any side effects and about medicines you take. movantik may interact with them causing side effects. why hold it in? have your movantik moment. talk to your doctor about opioid-induced constipation. if you can't afford your medication, astrazeneca may be able to help. we are going over the rules that have gotten me to this point in my career where i can play for charity in actionalertsplus.com instead of trading at my own hedge fund which i retired from. but the lessons of the hedge fund are very much with me, and i'm going over them tonight in this special show to help you with your portfolio. believe me, it takes only one or two losers to wreck a portfolio. i try to devote far more of my

time analyzing my loser stocks than my winners, not because of some sort of masochistic streak. rather, i recognize that stocks oven telegraph declines ahead of time. lost control is the paramount concern for all of those in the market because the winners, the good stocks, i got to tell you something. they take care of themselves. take the loss before it gets hideous. don't buy into the notion that you can't sell until it comes back, and then you promise not to do it again. how many times have i heard that one? by the way, that's how losers think. you need to think like a winner, not a loser. so you want one of those people whom i answer with, focus, will you, on twitter because you are obviously unfocused and undone by the market. of course the flip side is true too. you don't have a profit. listen to me, you do not have a profit until you sell the stock and nail it down. >> sell, sell, sell. >> it's not a profit.

it's something ephemeral. people constantly confuse book gains, real gains you can take to the bank, or of course to get yourself a nice cashmere sweater with phony paper gains because they can be taken away in a heartbeat by a tough market. most people are reluctant to ever book a profit because they don't want to pay taxes. i always tell people if i could just rewind the tape to january of 2000 or july of 2007, when people were sitting on literally trillions of dollars in unrealized gains because they didn't want to pay the tax man, we would be able to drill this point home well enough that people would respect it. gains not taken can be losses that will be taken. gains taken never become losses. it's that simple. i stress this point because we have all been brainwashed not to sell. somehow we think it's sinful. it's trading, whoa. it's commonsensical to sell. it's logical to sell, and it may be the only way to really get rich in a choppy business.

but it's counter to human nature, and when it comes to stocks and human nature, i think you've got to learn to counter it. it's so often hard to resist, though. i get it. for example, i can't tell you how many times i have had my heard in my throat, pounding, pounding, because i didn't own enough stock in a rising market. i didn't have enough exposure. i can't tell you how often i felt that i had to play. i had to be big in stocks because the market was going higher, and it was going higher without me. do you know that almost every time i had that feeling, that instinct, almost every time i had that "i can't miss this action drama playing around in my head," do you know what happened? that's right. i lost money. disappoint is the most important rule of winning investing. we're doing winning investing here. that's what we're teaching. sometimes that discipline means admitting that you missed the opportunity and it is already too late. i almost always feel like i have missed something right near the top of the market, the top of the move.

when i was a hedge fund manager, i actually turned that sentiment into a profit center by actually betting against myself and the market when i thought i was missing the upside. that heart stuck in the throat feeling correlated with the tops of moves, not the bottom ones. i actually made money saying, oh, there's that pan again. sell. i already remember that the best time to buy is when it feels most awful, not when it would relieve the incessant pain of fearing that you're going to miss the next big rally, especially given that the rally has invariably already occurred. you must also protect yourself against overtrading because there aren't that many great ideas out there to act on. you always have to think about when you're prone to this. for instance, when i go on twitter, i'm always amazed at how people want me to opine on a stock that just reported and they want me to do it just in one headline alone. i find the business wires that report these numbers are almost always wrong in their quick takeaways simply because business is a lot harder and

complicated than the press release, which often obfuscates what's really happening as anyone who's ever tried to go through a bank quarter noes. the headlines can't capture the reality because it's a jump be. headlines that present stories about such and such a number being better than expected are the types of headlines that always punish the quick draw mcgraw traders. i think you have to read the whole story and listen to the conference call. which part's most important? the portion right before the q&a when the company lays out its guidance for the future. that moment and not what the headline writer is responding to, is what you will see will make the stock move. that's where you get the accurate move from. everything else, guesswork. we can't do much with just guesswork except get in trouble. so many of you want to get in trouble because periodically you want to be right. this point is very important.

because of electronic trading you can move too fast and often many do. learn the whole story. if this is really a great opportunity, you will not miss it by taking time to inform yourself, believe me. before you do so, be sure you know what to look for and what matters. you might want to have a grid of what all the analysts have been saying about what is about to occur. that way you won't be fooled by the first move which could be taken by people who are less informed than you are, and they are less informed, believe me. and most important understand that the headline for many companies' earnings doesn't even tell you how the company is doing on those key metrics. within oil, what are you looking for? production growth, not earnings per share. with hotels, what are you looking for? revenue per route, not earnings per share. airlines, revenue per seat mile, not earnings per share. many a time in my career, i've seen up headline numbers only to learn the company is guiding down expectations later in the conference call or that the key metric estimate wasn't beaten even though the headline says it was. the bottom line, don't let gains turn into losses, and certainly never trade because you fear the

market going up without you or a stock rallying off a headline that maybe might be wrong as they so often are. ed in california, ed. >> caller: booyah, jim. >> booyah, ed. >> caller: i'd like your opinion on a strategy that i've been using in deep in the money calls going out anywhere from six to trefl months on stocks that you recommend. this is to avoid any possible volatility in the market swings. what do you think of that? >> this is exactly what i want. ed is doing exactly what i want. i talked about this in getting back to even. a 100-page chapter that i tried to cut back and decided i couldn't. he is doing what's called stock replacement. he is literally taking the risk out of common stock by declining -- by stopping the decline at a certain point and gettg the upside. big percentage gains. you are the man, ed. you know what i have to say about the people who are the man. you have horse sense. jacob in california, please, jacob. >> caller: hey, jim. how are you? booyah. >> booyah. >> caller: hey, jim, i love the show. >> thank you. >> caller: love the advice. it's phenomenal.

>> thank you. >> caller: as an initial first-time investor, what is your recommendation and how many positions one should have without going, you know, over their head? >> i think more than a dozen, and an individual who may not be, let's say, as sophisticated as we are is going to end up making mistakes. so try to limit it. when we play am i diversified, it's five with "mad money." that's a good way to get started. larry in massachusetts, larry. >> caller: you know i'm a cramaniac. when does a core holding start looking long in the tooth or something to be ditched? in other words, what characteristics made it a core holding such that the bad news threshold for dumping it are higher? >> what a great question. thank you for all those nice things about actionalertsplus.com. here's what you look for. when everybody knows what you know, when there isn't a single analyst that doesn't love your stock, when you constantly hear that that company is great and the ceo is great, you know what? it's long in the tooth. got fomo?

don't trade because you fear the market going up without you or if you fear a stock rallying off a headline that may be wrong. there is such a thing as overtrading by the way. i'm here to help you out. coming up, sure, corrections will come, but you don't have to suffer when they strike. i'm going to show you how to prepare for those painful days. >> the house of pain. >> then we all want our stocks to succeed, but getting too attached can be a portfolio killer. i'll explain why emotions and money don't mix. they're oil and water. plus i'm taking on your tweets. stick with cramer.

tonight we are going over the rules and disciplines that i have learned in, holy cow, four decades of investing. rules that i want you to know, rules that i want you to just

kind of learn by heart like i have. not just like the usual twitter 140 character stuff. this is real stuff here. a lot of people, for instance, don't think a correction is ever going to occur. they get lulled into the market during good times. a lot of people get involved when there's just been months and months of good times. and when bad times hit, they are eager to pin blame or to be shocked in disbelief instead of just expecting corrections and not being fearful of them. yep, when a correction occurs, many investors decided they now want nothing to do with the market. the correction signifies that something is wrong with the market as a whole as if these aren't stocks of companies, and therefore the market can't be touched. that is a really big mistake that is made constantly. corrections happen all the time. they particularly happen after big runs. they're to be anticipated. i learned this in the great peter lynch years ago when he used to run magellan fund.

he said anticipate these. but you can't write off the market when they happen. i always like to tell the stories. i like to put things in sports analogi analogies. i tell the story of joe dimaggio after his own personal bull market. his 56-game hitting streak, still the most amazing baseball feat of all time. when he failed to hit in game 57, should you have traded deimagine yed dimaggio? was he finished? is that smart thinking? same with the market. corrections are to be expected and accepted as a matter of course, particularly after 56 great days of the market, you're going to get something like that. hey, when they happen, they're not a reason to panic. they can be great opportunities even as people insist that the market's done because the charts are bad, taking out the 200-day moving average, created a bearish cross, a death cross, a hindenburg cross, or the market's unpalatable, some clap trap i hear every time the market claps a winning streak

with a couple of losses, or you read bears who come out of hibernation. they like to be right that day. now, given that so many don't expect corrections, here's something that seems press commonsensical but studiously avoided by many people i have met. lots of people wrongly believe in being fully invested at all times. lots of managers think they're supposed to be fully invested every day. i have to tell you this is nonsense. lots of times the market just stinks so you want to have some cash on hand. i'm not saying go in and out of the market. i'm saying having some cash. pretty good. a lot of times there's nothing to do except have some cash. in fact, one of the chief reasons i outperform pretty much every manager in the business during my 14-year run as a professional money manager is there were substantial blocks of time where i had a lot of cash. i was largely in cash, including the 1987 crash when the market dropped 508 points in one day but from a much lower level than this one, so it was actually a 22.6% hit to be precise. cash is such a great investment

at times. even when it earns little to nothing as it has for ages. you know what, i regard it as a better hedge, a perfect hedge as opposed to shorting the market because the market keeps going higher as it did say in 1999 or the year before the great recession in 2008, you could face devastating losses as an overvalued market can continue to stay overvalued and climb and climb and climb. i think cash may be the single most underrated of investments because nothing feels as good as cash when the market comes down. i know that from my charitable trust. always great to have a big cash position when the market gets hammered. it's one of the reasons why if you follow my method of how to trade around a stock, you will know that as the market spikes, i take stock off, sell a little, trim here and there. yes, to get ready and reposition myself for the next correction. close viewers of the show know i sell strength and i buy weakness. when the time is right, i almost always have that cash to put to work because i believe so strongly in cash as an option.

if you don't raise that cash, here's what could happen. you might end up selling your winners to subsidize your losers. that is another common mistake people make. so many bad portfolio managers and so many befuddled individual investors always sell their best stocks so they can hold on to their worst stocks. you can always tell when you see this pattern. you'll be reviewing someone's portfolio, as i used to all the time before my rules prohibited giving individual investment advice, and the portfolio would be filled with junk. and you will say, hey, what happened to all of your blue chips, the kind of stocks that can best weather the tough times, allow you to come out smiling on the other side? invariably they will say, hi to sell those. hi to buy more of these other stocks because they kept going down. many on twitter seem to have this problem. portfolios riddled with stocks that stopped working a long time ago. i have counseled enough professional investors that were in trouble to know that the first thing that gets sold are the best stocks because they can be sold. there's always a bid for the good stocks, a ready buyer that's willing to put up capital while the bad stocks just seem

to go straight down the line and fold under any pressure. but when even some of the more admired professionals have a handful of good and awful stocks, they don't sell the awful ones because they're down so much. a typical alibi for notticing action. nonsense. they're probably going lower. please do not subsidize losing stocks with winners. if you own companies with deteriorating fundamentals as opposed to good companies with deteriorating stock prices, a common occurrence, please sell the bad ones. take the loss. reapply the proceeds to the good ones. move on. don't feel bad for yourself. lots of times the circumstances have simply changed for the stock market. the company in which you have invested might do a lot of business, say, in russia, which could have been great before sochi but then with the fight over ukraine, the profile changed, maybe dramatically. you may have to sell that one for a company that's largely domestic or perhaps a slow down in the economy has caused shoppers to stay away from expensive branded products, which happened in what i call the deep pantrying of america, one of the largest trends out there that blindsided many of the food stocks traditionally thought to be safe.

or perhaps a terrific drug company like pfizer had been making fortunes on some very big drugs until they went off patent and the generic competition crushed their margins. these kinds of stocks were so often kept because they had gone down and investors bought more of these stocks and subsidized these losers with the sacrifice of winning stocks. let me give you the bottom line. get ready for the correction. it's coming. have some cash on hand. and when it happens, don't sell the good ones to subsidize the bad. you'll end up with a terrible portfolio that won't be able to bounce back when times turn better. "mad money" is back after the break.

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they're a drag, aren't they? i hate rules but they will keep you from getting blown out and help you navigate the tougher times that come up when you least expect it. if you aren't prepared mentally, you won't be tough enough to handle these moments, and you will flee instead of thinking about what's really right to do, or you'll be paralyzed with fear and self-doubt instead of mindful and opportunistic. emotions have to be checked at the door in this business. i often hear people say, i hope that a stock goes up or they ask @jimcramer on twitter, doesn't it have to go up, implying a question that's like, doesn't a team have to win a game sometime? people, this is not a sporting event. we have no room for hoping or rooting. we are buying stocks that we believe should go higher because of the fundamentals, and we're avoiding stocks where the underlying business is bad and getting worse. where should hope fit in? nowhere. people treat this business at times like a religion, like an ideology. they believe that if they pray things will work out, maybe

they're chanting, maybe they will, or they fall in love with these miserable pieces of paper with the idea that love will somehow be requited. be realistic. hope, pray, love, rooting -- these are all enemies of good stock picking. i can still recall the ringing in my ears when i would get off the trading desk with karen cramer who was our head trade and she would say, what's the deal with this memorex, a company that got crushed back in the 90s. i would say, hey, i'm hoping it gets a big contract. she would scream. hope? hope? we need hope to make this work? sell it and get me something where we have more in our favor than just hope. man, what a beat-down. many times she didn't even ask. she just sold it after i used the word "hope" to see if i would buy it back. invariably i didn't buy it back. i was hoping something would happen, and once it was sold, i felt, well, relief. sometimes the stocks of good companies do nothing and you get frustrated and do want to sell them. good stocks at times can do nothing for ages.

i remember when berkshire hathaway did nothing for like ages. if you're a professional investor at a hedge fund, this waiting can be unnerving. you have partners in your fund calling you regularly asking what you're doing with their money. they don't want to hear you own a whole bunch of stocks that aren't moving up at once. but individuals have no such pain. individuals can sit on stocks as long as they want. unfortunately when i counsel patients, many individuals get antsy. they want a tesla, a netflix. they want the gains, get it now. give me mobileye. i say some of the best stocks require some incubation. do you know how patient i was owning intel? for 18 months i watched it do nothing, paint dre, paint dry, paint dry. nothing at all in the late 1980s. but i held on to it and i believed. a common strain of those who would call regulated asked how i was doing. later in my career when partners hounded me daily, i would never have held on to an intel that long. lots of stories take a long time

to incubate, to develop. lots of turnarounds take 18 months to two years. when you buy a stock and recognize it could take a long time to turn, mark it as such in your mind so you don't get tired of it and sell it, give up. here's something really important to remember. stocks that are stuck in the mud a long time tend to romp like thoroughbreds when they're freed from the gate. they're mudders. do you have the patience? if you don't, let someone else invest your money. finally i like to say no should awould acould as. one despicable trait is second guessing. you make a call. you buy some celgene. then it has a patent issue that caused it to get hammered. or you sell dupont the day before a noted activist takes a note the stake and sends it soaring. next thing you're filled with self-doubt. that's nonsense. get it together. the market requires you to have the right head on at all times. you have to be ready to see the ball right for the next pitch. there's no time to get down on yourself. do that for fantasy if you cut brady or something.

if you want to be introspective and constructive, bracket some time to assess your strategy and your stock picking abilities. but to second guess your strategies is to put yourself in a loser mind set. mind you, i want the pain felt. when i thought one of the younger people in my office made a mistake that i thought was costly to me, i made them wear the symbol of the stock as a post it on their forehead for the day. i even sent them outside. any time spend saying, if only i, is time that keeps you from getting the next big stock. karen always believed women traders are better than men. she did teach me to steel myself and to come in the next day without the mental baggage of a screw-up so i could be ready to swing at the next big pitch. here's the bottom line. this business is not about hope. it's about the fundamentals. don't root for your stocks to go higher. just pick shares in good companies and they will unless

circumstances change dramatically that cause you to sell, they'll go higher. but be patient on the good ones and try to keep the self-doubt to a minimum. clear your head. get out there immediately and find out the next big winning idea. there's just no room for should aa, would a, could a. and stick with cramer.

favorite part of the special. we go for what you want. that's right. we got some tweets that you've been sending me @jimcramer, #mad tweets. let's get right to them. our first tweet comes from mark richard underscore auto dividend reinvestment or take cash and bisectively. your take? >> really easy call. a huge percentage of the gains that people have in the stock market over the years come from

dividend revestment. this is a no-brainer. compounding is the secret behind great wealth. reinvest. here we have @jamie deveez. who wants to know how you came up with the way you say bristol-myers. that happened to be an old broker at kidder peabody. can you imagine when karen and i traded together, we had a broker who often mentioned bristol-myers. he always said it that way, and i decided, hey, that must be the way it's really pronounced. let's take our next tweet from @craig boo, who asks which is smarter, add to holding that has been recently hurt or add to a new position? if you do not want to buy more of that stock lower, then you should just sell it because if you liked it higher, you should love it lower. so the answer is buy more of the lower one or get rid of it. up next, @no to l -- whatever -- asks at what percent for profit should we sell shares.

okay. this is really important. there's no firm rule. what i like to do is when a stock goes up about 50%, i like to sell some of it and then a little bit more, and i sell more. but the ultimate goal for all great investing, you play with the house's money. that's the way to do it. always try to fight to get to the point where you're playing for the house's money. and, yes, stay with cramer. your insurance company

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i like to say there's always a bull market somewhere. i promise to try to find it just for you right here on "mad money." i'm jim cramer, and i will see you next time.

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