Knowledge Is Power

This article originally appeared Jan. 27, 2014, on Real Money. To read more content like this, + see inside Jim Cramer's multi-million dollar portfolio for FREE  -- Click Here NOW.

Sometimes it is a game of pain. Other times it is a time of gain. They've been joined at the hip for a very long time. But in the last few months, the pain part of the equation disappeared and all we had was gain.

There are two kinds of pain: the kind of giving up the gain and the kind of taking the loss. Now, I know it seems ridiculous to those who are on the losing end of the stick, but the decision to cut your loss or take your gain is pretty much the same. If you think the stock is going down from here, you need to cut your losses. If you think that it is going to bottom, you need to stand pat.

Now, as I write in Get Rich Carefully, you want to be unemotional about the process. You don't want to make your decision based on your pain threshold because there's a rather remarkable similarity to the pain that other shareholders are feeling. You aren't alone. You don't know what to do and you panic. Initially, you feel relieved, but you are failing at that very moment of max pain to recognize that many others are giving up at the same time and that still others have been waiting for this juicy pullback to get in.

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