CNBC's Jim Cramer said he spends a lot of time helping investors deal with their mistakes. Market action doesn't always make sense, he explained. Stocks can go up or down for unknown reasons.
"The market's going to make mistakes," he said. "Your job is to recognize when it's doing something wrong and try to take advantage of it."
Like any other market, Cramer said, the stock market is prone to distortions. He stressed that stock prices do not solely reflect a company's fundamentals. Perceptions on Wall Street and the mechanics of money management also play a factor.
The rise of exchange-traded funds has also made it harder to judge stocks by their prices alone, Cramer said. He added that even stocks of well-run companies can get "dragged down by an ETF-driven riptide." If one company in a certain sector has a bad quarter, it can bring down the rest of the companies in the group, even if they're doing well, Cramer said. That can be an opportunity to buy, he explained.
"The caveat here, though, is that sometimes when the market makes a mistake, it's not worth trying to fight it," he said. "Your goal here is not necessarily to be right, it's to make money. Sometimes that means being a little cynical about other people's expectations."
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