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Compounding calculator

What a return does when it is left to run on itself, period after period. The curve is arithmetic and the arithmetic is correct — the part that is not arithmetic is the assumption that the rate stays the same, and that assumption is where every one of these calculators quietly becomes a sales pitch.

The formula

Without contributions: balance = start × (1 + r)ⁿ
With them, per period: balance = balance × (1 + r) + contribution

r — the return for one period, as a fraction. 2% is 0.02.
n — how many periods.
The contribution is added after the growth, so money paid in this period does not earn a return in the period it arrives. That is the conservative reading and the honest one.

Every line here is exact. What is not exact is r — and the whole question is whether a single number can stand for what a trading account does.

Worked: 10,000 at 2% a month for a year

Left: 10,000 compounding alone, ending at 12,682.42. Right: the same with 500 added monthly, ending at 19,388.46 — of which 16,000 is money paid in rather than earned.
Month	Earned	Balance	Balance, +500/month
1	200.00	10,200.00	10,700.00
2	204.00	10,404.00	11,414.00
3	208.08	10,612.08	12,142.28
4	212.24	10,824.32	12,885.13
5	216.49	11,040.81	13,642.83
6	220.82	11,261.62	14,415.68
7	225.23	11,486.86	15,204.00
8	229.74	11,716.59	16,008.08
9	234.33	11,950.93	16,828.24
10	239.02	12,189.94	17,664.80
11	243.80	12,433.74	18,518.10
12	248.67	12,682.42	19,388.46

The right-hand column is the honest lesson in the whole exercise. It ends 6,706 higher than the left, and 6,000 of that difference is deposits. On a small account, in the early periods, contributions dominate returns — and no amount of compounding changes that until the balance is large enough for the percentage to matter.

What each rate does over time

10,000, no contributions, compounded per month.

Read the bottom row and then decide whether you believe it. 10% a month is 213% a year, every year, indefinitely.
Monthly	6 months	12 months	24 months	36 months	60 months	Annualised
1.0%	10,615	11,268	12,697	14,308	18,167	12.7%
2.0%	11,262	12,682	16,084	20,399	32,810	26.8%
3.0%	11,941	14,258	20,328	28,983	58,916	42.6%
5.0%	13,401	17,959	32,251	57,918	186,792	79.6%
10.0%	17,716	31,384	98,497	309,127	3,044,816	213.8%

What the curve is actually for, and three reasons it is not a plan

1. The rate is not constant, and the variance is not free. Two accounts averaging 2% a month arrive at different places if one did it steadily and the other alternated +12% and −8%. Volatility drags on compounded returns — the average of the returns is not the return of the average — so a smooth 2% and a lumpy 2% are genuinely different outcomes, and the lumpy one is worse.

2. Position size grows with the account, and so does the money at risk.A 20% drawdown at month 60 costs several times what the identical 20% costs at month 6. The percentage is unchanged; the number of currency units is not, and it is the currency units that get traded through.

3. Nothing scales indefinitely. Strategies have capacity. Slippage widens with size, some setups stop filling, and the edge that worked at 0.1 lots may simply not exist at 50. The curve continues; the market underneath it does not.

This page will project any rate you type, including absurd ones, because refusing to would be pretending the arithmetic is different than it is. What it will not do is suggest that a rate is achievable, or that a projection is a forecast. It is neither.

The same arithmetic, running the other way

Enter a negative rate and the curve decays. There is one genuine piece of good news in it: under fixed-fractional sizing, losses are taken on a shrinking balance, so decline decelerates while growth accelerates. An account losing 2% per trade mathematically cannot reach zero.

It can reach a place from which recovery is no longer realistic, which is a different and more practical kind of ruin — and that is the number worth planning around.

Questions

Is a 10% monthly return realistic?

As a sustained average, no — and the table shows why the question answers itself. Ten percent a month compounded is roughly 213% a year, which would make a modest account into a very large one inside a decade and would make its owner one of the best-performing traders alive. Individual months of 10% are ordinary. Sixty consecutive ones are not, and any presentation of that curve as a plan is a sales device.

Should I withdraw profits or compound them?

It is a risk decision before it is a return decision, and the arithmetic on this page cannot make it for you. Compounding grows the position size alongside the account, so a drawdown later costs more money than the same percentage would today. Withdrawing caps that, at the cost of the curve. What the numbers do say is that the two are not equivalent to your future self: the compounded account is more volatile in money terms even though it is identical in percentage terms.

Why does this calculator not let me compound daily?

It does — the period is whatever you decide it is, and nothing here assumes a month. What it will not do is convert a per-trade edge into a per-day return, because that requires assuming a trade frequency and a distribution, and the moment we assume those the output becomes a forecast rather than arithmetic. Pick the period you actually measure in and enter the rate for that period.

Does compounding work the same way against you?

Exactly the same way, which is the part these calculators usually leave out. Enter a negative rate and the curve decays instead of growing — and because each loss is taken on a smaller balance, fixed-fractional losing decelerates while fixed-fractional winning accelerates. That asymmetry is genuinely in your favour, and it is the only piece of good news on the subject.

Your actual rate is in your statement, not in this box

The only useful number to type into a compounding calculator is one you measured, and a projection built on a guess is decoration. TapeSheet reads your monthly returns straight off your statement — the real distribution, including the months you would rather not average in. Free, no signup, and the file never leaves your device.

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