Cramer's 'Mad Money' Recap: A Playbook for Selloffs

In a down market, it's tempting to shop for a bottom, trying to get stocks at their cheapest as they rebound, but Cramer said "that's rarely a safe bet."

Cramer said it's most important to "avoid broken companies at all cost."

A Mega Sale on Stocks

"A correction is, in the end, just a mega sale on stocks," Cramer said. When you go shopping at the store, you don't say you made a bad purchase because you got something cheap. He said it's important to take a similar attitude when approaching a market downturn.

The first place to look for opportunities, according to Cramer, is in stocks that have pulled back from their highs. Stocks that are hitting new highs tend to be more expensive, but when they get knocked off the new high list, they become more attractive.

Of course, some stocks coming off their highs will be going lower for good reasons, so it's important to choose wisely. "You'll have to use your discretion for each individual stock," Cramer said.

The rewards of picking correctly, though, are great, as stocks that are off their highs in a correction "recover hardest and fastest from the carnage unless again they are the reason for the carnage," Cramer said. Investors should have at least one stock that's off its high in their selloff playbook, so when the decline comes they can take advantage of it.