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Rule 7: No One Made a Dime by Panicking

You see it over and over again.

A stock gets hammered.
People flee after the hammering.

The market gets crushed on a huge down day. People leave at the end of the day.

A sector gets annihilated. Quickly. People can't take the pain; they bolt after the annihilation.

Panic is the operating instinct in all of these cases.

There's something basic and instinctive about panic -- about the desire to flee.

It might work when it comes to individuals and things that might threaten us physically.

But it can't make you a dime.

That's why I say: No one ever made a dime panicking.

There will always be a better time to go,

a better time to leave the table than the one brought on by panic.

And don't I know it.

Back in 2010 I was on air for the flash crash, when the market fell 900 points in less than a half hour.

I watched the monitor for the ticker---
the crawl that's underneath the picture 'Äì
and I couldn't believe what was happening.

People were dumping stock simply because everyone else was dumping stock.

That's what a panic looks like.

It's textbook.

I urged people to pick a stock they loved and buy it using limit orders, so you would not have to accept a price you didn't like.

The results?

I am still getting thanked for what happened that day.

But all that really happened was I realized that no one ever made a dime panicking.

So I chose to help people profit from it.

I did the same back in 2016 when we had a two -day thousand-point sell-off.

I told people to buy down on limits and we did so for ActionAlertsPlus.com, too.

We got outstanding buys simply because we used the panic to our own merits.  

So I want you to do something for me next time there is a panic.

I want you to take the opposite side of the trade.

When you see one of those high-speed routs of a sector or a stock -- buy a little.
Get a feel for it.
See what I mean.

The most rewarding trades you can make are those where the decks have been cleared out by panicky folks using market orders who just don't get that the exit doors aren't as big as they think they are.

Mind you, I am not saying that all merchandise that gets panicked out of is worth buying for the long term.

I am saying that it's a rare day when you have a stock or a market that has been socked --

that there won't be some sort of bounce that allows you to get out at a better price than you would have if you just joined the fleeing masses.

Action Alerts Plus portfolio manager and TheStreet's founder Jim Cramer has learned a lot over his 30+ years of investing. So he created a list of 25 Rules for Investing that can help you avoid the novice pitfalls that even he fell into on occasion.

Like this textbook scenario: "The market gets crushed on a huge down day. People leave at the end of the day...because they can't take the pain...and they bolt after the annihilation."

It happens all the time.  

"There's something basic and instinctive about panic -- about the desire to flee....but it can't make you a dime."

Rule 7: No One Makes a Dime by Panicking

While it may not be the time to sell, it actually may be a good time to buy.

So watch Cramer discuss Rule #7 above as he talks about what happened during the flash crash and other big market downturns, how you can set limit orders and why people are still calling him to thank him for his sound advice.

Sign up and watch Jim Cramer's 25 Rules For Investing here!

Watch More of Jim's Rules for Investing: