Cramer's 'Mad Money' Recap: Mad Money's Rally Playbook

He reminded viewers that big momentum names also need to be periodically trimmed to remain diversified. He said that no stock should account for more than 20% of a portfolio and even the successful stocks need to be sold.

The second class of stocks that should be sold into a rally are the losers. He said stocks that don't perform well during a market rally often have underlying issues. "Stocks that don't go up aren't ones you want," he said.

A Risky Portfolio

Cramer warned that making too much money during a rally is also a problem. He cautioned that if investors' portfolios are posting huge gains, it probably means that they're taking on too much risk.

Rallies, he said, are the perfect diagnostic tool to assess just how speculative or how risky a portfolio actually is. He suggested that investors use big rallies to examine their portfolios and make adjustments.

Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.