One rule for online investors.

One lesson I learned the hard way this week is this:

Always keep a large quantity of cash in your online trading account.

It's too easy to invest all of the cash in the account, after all, cash that's just sitting there isn't really doing anything. It seems to make sense to use as much of it as possible right?

Not when you consider what just happened to the market following the disaster in Japan. I had all but $27 invested. The market took a huge dive and it was easy to sell off my big gainers immediately.

There were a lot of opportunities to buy opening up. Monday, the U.S. markets opened extremely low and started climbing up.

When I sold some stock, I didn't realize that funds from stock sales require several days to settle before I can use them again. It takes nearly as many days to add cash from the bank into the portfolio.

So I was stuck with $27 in the middle of a crashing market. By next week when my funds finally get settled, it will be over. Downwad pressure on consumer spending will be applied by gas prices, food prices, increased taxes on alcohol and tobacco, the removal of collective bargaining rights of public sector workers, potentially followed by the repeal of minimum wage increases in some states to compete for business.

The attempt by state and federal governments to balance their budgets will be a fiscal vortex into oblivion.

I digress. Keep your account at least 50% liquid so you can jump in as soon as you see an opportunity.