Roger Nusbaum quoting James Stack (link) in his blog entry "Cash is Not Trash."
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Stack calls his method Safety First. If this is new to you, the big idea is that over the long term you can outperform the market by avoiding the full consequence of large market declines. In the past I've referred to John Serrapere's strategy of 75/50 which is trying to capture 75% of the upside with only half of the downside
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This kind of stuff is more for long term investors interested in doing some kind of active protection management. It isn't for everyone. Cash is a good cushion to have, even when many money market funds are paying zero. As for specifics, Nusbaum uses the popular and simple 200 day moving average as a timing mechanism to slightly reduce equity exposure.
I want to mention the "baby duck" syndrome for traders as well. A baby duck will attach itself to the first thing it sees regularly as the mother duck. Similarly, many traders get imprinted by the first markets they experience. I started trading in the summer of 1987, a few months before the 1987 crash. That searing experience has stayed with me, so I remain ever vigilant and cautious, and tend to keep a decent amount of cash or equivalents as a cushion.
Going further with the baby duck theme, a person's first experiences with money and spending also can imprint upon them. Suzy Orman talks about this and how it can effect a person's lifelong attitudes towards money. Think back to your first memories of money, finding a coin in the dirt (Suzy's experience), or spending to buy candy or being given an allowance. The energy from those early experiences and what was said to us, often shape the long term attitudes towards money. Whether it is scarce or not, whether it is meant to be spent freely, or hoarded, or treated with respect.
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