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

Investors often make the mistake of burying their heads in the sand, avoiding the news because it's just too painful. Cramer believes this is a wrong approach: "You know when you want to pay the most attention to stocks? When they're going lower."

Have Cash Available

To take advantage on down days, investors are going to need cash. "Most homegamers are fully invested all the time, meaning their portfolio is 100% stock and zero cash. ... My rule is to never have less than 5% cash," Cramer said.

Because corrections are inevitable, it's important to have cash available to buy stocks when they get cheaper.

"A selloff is only as good or bad as you make it," Cramer said. "If you own nothing and you're trying to build up your portfolio, a selloff is a gift."

Circle the Wagons

Cramer suggested that investors make a list of stock they own and every stock they're considering. Stocks can be divided into four categories.

"Rank them every Friday," Cramer said. "Wait until you have a free moment to catch your breath." It doesn't pay to try to rank stocks in the heat of the trading day.

The first stocks are "ones you're trying to back the truck up on. These are the stocks you plan on buying, period. They're your serious conviction names." Second are the ones that are buys, but only if they come lower. Third are stocks "you own and would sell, but only if they rally 5 to 7 percent." The fourth set of stocks is made up of "stocks you own and want to sell right now," Cramer said.