Cramer's 'Mad Money' Recap for Aug. 6

"You shave a little off to bring in some profits," he said.

Then people would wait for something to happen, as long as it doesn't hurt the basic fundamental outlook of the company they own, to knock the stock down a peg or two. "As the stock comes down, you buy it back in increments," Cramer said. "Since we started with 300 shares, let's keep using increments of 50 to buy it back."

Although all the trimming and adding of stock might not seem like much, "over time your profits add up," he said.

One important rule to remember when trading around a core position, Cramer said, is that when using the above-mentioned example, he would not own more than 300 shares or fewer than 100.

"The basic idea is to avoid putting yourself in a position where you have too much on the table in case the stock gets swatted down, or too little on the table to take advantage of any upside that comes your way," he said.

Cramer's final investing trick he wants to impart is the importance of realizing that "sooner or later, all hot stocks implode."

By "hot" stocks, Cramer means "small" stocks, or stocks with a low market-cap and very little research coverage, that have been going up for a long time.

"Small, hot" stocks are definitely worth owning, but people must know when to sell them, Cramer said. That moment usually comes when there are too many analysts jumping on the bandwagon.