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Bad trades are going to happen, but if you can learn from the people who've been there, chances improve that you can learn how to spot the true winners and how to limit your losses.

That was the message Jim Cramer offered on Thursday's "Mad Money" television show. Billing the show as a "day of atonement," Cramer said he wanted to own up to his biggest mistakes, with the hope that others not be destined to repeat them.

What traders and investors need at the outset, he said, is discipline, because most mistakes come about either from being too hopeful or from plain arrogance.

He started his cautionary tale by going back seven years to a time he owned paper that would prove to be problematic -- the common stock of


( CD).

In 1998, he bought shares in the new company that was created by the merger of CUC International and HFS. The trouble began when past accounting irregularities were revealed at the old CUC. Cendant's stock dropped. But Cramer, still working for the hedge fund Cramer Berkowitz at the time, was in "hope mode." He saw the decline as a buying opportunity, and he picked up 200,000 more shares, taking his total to 1 million.

That only made the pain that was coming that much worse. Cendant's stock got cut in half. And Cramer's partner at the fund had to call him while he was on vacation to let him know they were down $17 million on the Cendant position.

His advice here was simple. "When you see any accounting irregularities, you sell," he said. Not only that, but stay clear "until it's well over with."

A more recent stock on Cramer's list of regrets was

Dick's Sporting Goods

(DKS) - Get Free Report

, a company he believed in strongly and said could be bought, even as late as the day before its earnings report in August. Turned out to be a bad idea. Dick's came out with disappointing numbers and took down its guidance. The stock got slammed.

"I think I'm going to be eating crow about this one for at least the rest of the year, if not the decade," he said. Cramer believed that Dick's was like "Achilles without the heel," but he had made a crucial mistake -- he trusted management, and he failed to look closely enough at the company's takeover of Galyan's.

"When you're playing with retail be skeptical, more skeptical than I was," he said.

Another trade Cramer said he'd like to have back was

Montpelier Re


, which he played by going against the Hurricane Katrina anxiety. Again, he had erred. "It's just too risky to bet against Mother Nature," he said.

Something else you don't want to bet against is the

Federal Reserve

. Unfortunately, Cramer said he had done that, too, holding

Commerce Bancorp

(CBH) - Get Free Report


Annaly Mortgage

(NLY) - Get Free Report

even as the Fed was continuing to raise rates.

Learn to limit your mistakes, he advised. Do the homework, and not just a little. Listen to conference calls, watch presentations on a company's Web site, read the financial statements. Otherwise, you won't know if a stock that's falling is actually a good buying opportunity -- or a chance to sell before it gets even worse.

At the time of publication, Cramer was long Cendant.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for, Inc., and CNBC, and a director and co-founder of All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or is related to the specific opinions expressed by him on "Mad Money."

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Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.