An emergency fund is an absolute must for all traders. These funds should be kept in something highly liquid like a savings or money market account. It should be a minimum of 3 to 6 months of living expenses. This fund will ONLY be tapped in the case of an emergency like an illness, a major car or home repair or other type of crisis like an natural disaster. Once the situation passes this fund should be replenished immediately. This fund should never be used for discretionary (i.e. non essential) purchases.