Cramer's 'Mad Money' Recap: Disciples of Discipline

Although Cramer always advises his viewers to do their homework and know what they own, this rule is different because the point is to recognize that "sectors don't always matter when it comes to giving stocks momentum."

People should never confuse a rally within a sector for a rally of that entire sector, he said.

Also, he knows people don't always do their homework before buying stocks -- behavior Cramer said he does not approve of. He iterated that he believes people need to spend at least an hour a week per stock they own doing homework to make sure the stock is still a "sound" investment.

Breaking down the rule, Cramer said there are times people will see a rally in an entire sector. For example, if the Fed cuts rates, investors will see a rally in almost everything cyclical, or if the economy gets "pummeled," people will see a rally in consumer staples and food and beverage companies, he said.

"These are broad, sector-based rallies and you don't have to be all that discerning to pick out a good stock that will make you plenty of money when these things happen," Cramer said. "But most rallies don't work that way."

Market players will hear about health care rallies or transports rallies or tech rallies, but that doesn't mean the whole sector's rallying, he explained, because within sectors there are industries.