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

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.

The second kind of stock to shop for during a correction is one with a dividend that becomes a whole lot more attractive as share price decreases, Cramer said. "A market correction will give you higher yields," he added.

"I know dividend investing isn't sexy," Cramer said, but "no one ever woke up unhappy" the morning after buying a stock that made them money. "You want stocks that are practically guaranteed to put money in your pocket."

Again, be careful, Cramer urged. A good rule of thumb is to look at a company's earnings. If the expected earnings are at least twice the size of the dividend, the stock is a safe bet.

Two Kinds of Selloffs