Cramer's 'Mad Money' Recap: Play by the Rules

In the end, it doesn't matter what Cramer thought of the company. "What drives a stock is what the money managers think, and the money managers obey the cycle," he said.

Moving on to the next rule, the analysts that cover a given sector -- a group commonly referred to as the Street -- are "never bullish enough on good stocks, and ... never bearish enough on bad stocks," Cramer said. This means that market players can actually follow the Street's lead and still make money.

The reason analysts are never bullish or bearish enough is because they don't just cover individual stocks but cover an entire sector, he explained.

"If you're an analyst, and you're covering the oil patch, you always need to have some buys, some holds and some sells, Cramer said. "Even if oil is in free-fall, you're under a lot of pressure to put a buy on at least one or two oil companies. ... You can't say everything is a buy or everything is a sell."

Although this might be "terrible" for the analysts, it's great for investors, as it means "the Street will almost always treat a sector that's en fuego as being a lot less en fuego than it actually is," he said.

Therefore, people can make money by using this as an indicator to help get into hot sectors that will be "underappreciated even if they look like they're already smoking."

Enthusiasm Curbed

Taking a look at oil in 2003, 2004 and 2005, Cramer offered an example of how analysts were bullish but not as enthusiastic as they should have been.

"They would say things like higher oil prices were being caused by increased demand and not just tightness of supply," he said. "They would recommend oil stocks -- but not every oil stock. A lot got left behind by the analysts and went up anyway."

In fact, oil stocks didn't keep going up just because oil prices kept going up. They went up because the analysts had to keep their estimates too low and had to keep sell ratings on some oil stocks that kept blowing away the analysts' estimates, Cramer said.

However, the same holds true on the negative end, he continued. Although analysts were bearish on stocks such as eBay (EBAY Quote), Amazon (AMZN Quote) and Lucent (LU Quote), before these stocks had "serious declines," they should have stayed negative longer because they could have probably saved a lot of market players from the pain of the stocks' further declines.

Cramer's third rule pretty much means exactly what it sounds like: "Don't be a snob." It doesn't matter if people are snobs in their personal lives, he said. But if they're a snob about investing and are too busy looking at Neiman Marcus rather than Target (TGT Quote), they could be missing "great opportunities" to make money.

"The Street will almost always be late to picking up trends in low-end or even midgrade products, because everybody on the Street lives in an upper-class bubble," Cramer said.

Therefore, even an analyst, whose job it is to cover the restaurant industry, might not understand a casual-dining play such as Darden Restaurants (DRI Quote) as much as a higher-end stock like Morton's (MRT Quote) or Ruth's Chris Steakhouse (RUTH Quote), he said.

In fact, most big institutional players on Wall Street missed about a 50% gain with the big move Darden had between March 2005 and January 2006 because they were snobs and didn't want to go to Olive Garden or Red Lobster, Cramer said.