A beginner is better off starting with a relatively small account. Someone who has moved up to a solid semiprofessional level needs to start pushing up his account size to increase profits. An expert with a large account has to be cautious not to impact thin markets with his trades. He has to watch out for a fall in performance, a frequent side effect of greater size.

The minimum size for a trading account is about $20,000 at this time. Once you've moved up to the level of a serious amateur or a semiprofessional trader, $80,000 will give you more freedom to diversify. Once you get your account up to $250,000, you may start thinking of moving up to professional trading. These are absolute minimums, and if you can increase them, your life will be easier. Starting with $50,000, having $120,000 at a semiprofessional level, and moving up to professional trading at $500,000 will improve your chances of success.

What if you do not have that much? Trading on a shoestring raises the pressure to a deadly level. A person with a tiny account cannot apply the essential 2% Rule. If he has only $5,000, his permitted risk is only $100 per trade, which guarantees that he will be stopped out by market noise. A desperate beginner swallows hard and puts on a trade without a stop. Most likely, he'll lose, but what if he wins, ends up with $7,000, then puts on another trade and goes up to $10,000? If he is smart, he will sharply reduce his trading size and start using the 2% Rule now. He was very lucky and should put his winnings into a sensible trading program. Most people become intoxicated by success and cannot stop. A begin-ner who has doubled his $5,000 stake usually feels that the game is easy and he's a genius. He feels he can walk on water, but soon drowns.

You might be able to start by getting a trading job, but corporate Wall Street will not hire someone over 25 for a paying job as a trader trainee. A more realistic option value is to sharply cut expenses, get a moonlighting job, and save money as fast as you can, while paper trading the markets. This calls for discipline, and some of the best traders have started this way. The third option is to trade other people's money.

Trading your own capital reduces the level of stress. Having to raise money increases tension and interferes with trading. Taking a loan is not a sensible way to raise funds because the interest raises an insurmountable barrier to success. Borrowing money from family and friends has the added kicker of having to justify their trust and trying to show off.

Scared money is losing money. If you have to worry about paying it back, you cannot concentrate on trading. Companies that hire execu tives usually run credit checks on their candidates. A high level of debt kills a candidacy because a person who is worried about money can not properly concentrate on his job. I know a chronic loser who received a quarter million from his mom as a wedding gift. She told him to buy an exchange seat as an option investment, but he resented his financial dependency on the strong-willed lady and decided to show how good he really was. He took a loan against the seat and went to trade on the floor. His scheme had a predictable ending, and to this day his family talks of "the missing seat."

You are better off learning to trade with your own money. The time to use other people's money comes when you know what you are doing and want to leverage your skills. There are huge pools of capi tal sloshing through the financial system, looking for competent money managers. Show a good track record going back several years, and you will have all the money you care to manage.

I have a friend who earned an engineering degree but went to work as a floor clerk on a futures exchange. He spent several years learning to trade, saved $50,000, and then quit his job to trade full-time. He moonlighted by writing a book and teaching a few classes but contin ued to struggle despite his steady 50% annual returns. His profit was about $25,000 a year, but he had to pay rent, eat, and occasionally buy a new tennis racket and a pair of shoes. After a few years of this he had a bad year and broke even. That's when he had to eat his seed grain-dip into his trading capital for living expenses. Then he con nected with a big money management firm.

The firm checked his track record and staked him out with an additional $50,000. He was to trade through that firm, at low commissions, and keep 20% of any profits on managed money. He kept delivering, and they kept giving him more money to manage. In a few years he was up to $11 million but then had another bad year, returning only 18% profit. In the old days he would be dipping into his capital, but now the math was different. Eighteen percent profit on $11 million came to almost $2 million, and his 20% share was $400,000. That's how much he earned in a bad year. He now has over $100 million under management. His performance as a trader has not changed much, but the size of his rewards went through the roof.

You can start trading other people's money informally, without a license, although you will have to register once the funds under management exceed a certain limit. The rules are different for stocks and futures because they have different regulators.

You can begin by asking people to give you the power of attorney over their accounts, allowing you to trade but not to withdraw the money. Once you become registered, it is not a good idea to have individual managed accounts because their owners receive confirmation slips for each trade and pepper you with questions. It is better to have all your accounts in a pool whose members receive a single state ment at the end of the month telling them how much that pool is worth and what their share is.

Futures money managers are regulated by the National Futures Association (NFA). To become a Commodity Trading Advisor (CTA), you must pass an exam known as Series 3, unless you are a floor trader. Stock market money managers are regulated by the Securities and Exchange Commission (SEC). Their exam, called Series 7, is much harder and many people take months to prepare for it.

The more free-market NFA allows its members to charge performance fees, taking a share of profits, much as US lawyers work on contingency fees. It is not uncommon for a manager to take 20% of profits, but that is not how most of them make their money. Many charge 1% or 2% of assets as a management fee. If you collect 1% on $50 million, you are taking in half a million dollars a year just for being a nice guy. Any performance fees come on top of that as pure gravy.

The more blue-blood SEC does not allow performance fees, forcing its registrants to be satisfied with a small percentage of assets. Since the assets in the stock market are much greater than in the futures market, those fees are nothing to sneeze at. For all the mutual fund advertising hoopla, those fees are a key deciding factor in funds' long-term performance. The Vanguard Fund, which has always made low fees its key selling point, keeps outperforming most hot-shot managers in the long run.

Stock market money managers have found a way to run around the SEC regulation against performance fees. They set up vehicles known as hedge funds investors. Only so-called qualified investors who pass income and assets tests are allowed to invest in them. Hedge fund managers typically put their own money into the funds and receive performance fees comparable to those in futures markets. A hedge fund manager is trading his own money along with that of his clients, which is probably why hedge funds managers as a group outperform mutual funds. Tracking hedge fund managers and shifting funds between them offers an alternative to tracking the markets for wealthy investors. If you go this route, make sure you find out what percentage of their own assets they have in their funds.

Successful money managers go through three stages of development. Many begin by informally managing a few modest accounts. Then they become registered and the funds under management rise to millions of dollars. Those who accumulate a five-year track record of steady gains and low drawdowns can go after the key prize-pension funds and endowment money. Those who get to manage these assets are the true elite of professional money managers.