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

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.

This is what really counts and what people should pay attention to, Cramer said.

Cramer said he came up with this rule on June 22, 2005, when he got "caught up" in the idea of a tech rally and picked the two names that most represent tech: Microsoft (MSFT Quote) and Cisco (CSCO Quote). But later Cramer realized that the so-called tech rally was really a gadget rally.

"I fooled myself because Microsoft and Cisco had always been the tech stocks," he said. "It didn't matter that they didn't have any real exposure to the rally, because I was thinking of it as a tech rally, and in a tech rally you buy Microsoft."

It's easy to mistake a rally in an industry for a rally in the sector it belongs to, Cramer said, but if people remember this second rule, they should be able to make a lot more money.