Cramer's 'Mad Money' Recap: A Playbook for Selloffs

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Editor's note: The following is a recap of a "Mad Money" episode that originally aired Dec. 27, 2007.

In an inevitable market downturn, it's crucial that investors keep their heads and follow a specific playbook, Jim Cramer told viewers of his "Mad Money" TV show.

"I don't want you to panic," Cramer said. "I don't want you to run around anymore like a chicken with its head cut off. ... I want you to sit back and take a deep breath, calm down and do the right thing."

Investors can't keep calm without a playbook, Cramer stressed. Declines are inevitable, and too many regular people approach them like they're the end of the world. Cramer said pundits fail to acknowledge that the market has naturally occurring down days.

The key to a playbook for down days is that you should never let turbulence in the market scare you out of keeping your eye on the prize, Cramer said. "There are opportunities in every market. ... When stocks come down, they get cheaper."

On a down day, it's important to be able to tell the difference between real opportunities and fake ones. Cramer said that he made the most money on down days "because I got in at the right price range."

When there's a huge selloff, investors shouldn't kick themselves, but should maximize the opportunities a correction affords. Cramer actually hoped for corrections during his final years as a hedge fund manager. "Stocks that go lower that you like you can buy more of at lower prices," he said.