Forex compounding calculator: trading compound growth

See the arithmetic of a steady monthly return compounding on a forex or trading account, and why real trading rarely looks like that. No sign-up.

Enter a starting balance, a monthly return and a number of months. The table shows how a steady return compounds. Treat it as arithmetic, not a forecast.

How it works

Ending balance = starting balance x (1 + monthly return) ^ months. A 2% monthly return does not add 24% over a year; compounded, it gives about 26.8%, because each month's gain is earned on a larger balance.

Why this is a caution, not a promise

• Real trading returns are uneven. Some months lose, and losses compound too: see the drawdown recovery calculator.
• A smooth number like 2% a month is rarely what a journal shows. Check your own record before assuming any rate.
• Size and risk usually change as an account grows, which breaks the steady-return assumption.
• Withdrawals, fees and taxes are not included.

What a journal adds

To use a calculator like this honestly you need your real average monthly result and how much it varies. A complete journal gives you that. See win rate, profit factor and expectancy explained and why journaling is important.

This calculator is for education. It is not trading or investment advice, and the figures it shows are not predictions of results.

What a steady return does over time (hypothetical)

The table starts from a hypothetical $10,000 and applies a perfectly steady monthly return. It is arithmetic, not a forecast, and no real account produces a straight line like this.

The gap between 1% and 5% is far wider than five-to-one by year three. That is the attraction of compounding, and it is also why a pitch built on a smooth monthly figure should make you cautious: the further out the projection goes, the more it depends on a number nobody can promise.

Simple versus compound growth

Adding 2% of the starting balance every month gives 24% after a year. Compounding 2% on the growing balance gives about 26.8%. The difference looks small for one year, but over three years the simple figure is 72% and the compounded one is about 104%. The longer the period, the more of the result comes from earning on previous gains.

Volatility drag: why the same average does not give the same result

Compounding punishes uneven returns. Take two hypothetical accounts that both average +2% a month over two months. One earns +2% and +2%. The other earns +12% and -8%, which also averages +2%. The first ends at 1.0404 times its start, the second at 1.0304 times, because the loss lands on a bigger balance. The average is identical and the outcome is not.

This is the reason a journal records the spread of your results and not only the average. Two traders can report the same average month and have completely different equity curves.

What to take from your own journal first

• Your real average month. Pull each month's net result from your journal, not the best months you remember.
• How much your months vary. The standard deviation matters as much as the average. A journal that stores daily rows makes this easy to calculate.
• Months with a loss. Count them. If one month in three loses, a model that assumes a gain every month is not describing you.
• What changed as the balance grew. Many traders raise their lot size or their risk per trade after a good run, which changes the return profile. Record the risk percentage with each trade so you can see this.

What this calculator leaves out

• Drawdowns. Losses compound against you; see the drawdown recovery calculator for what a loss costs to repair.
• Withdrawals and deposits. Taking money out each month changes the growth path substantially.
• Fees, spread, swap and tax. Real costs reduce the monthly figure before it compounds.
• Capacity. Strategies that work at a small size can behave differently as lot sizes grow, especially on thin instruments.

Using it responsibly

A good use of the tool is as a sanity check on other people's claims. If someone promises a steady 10% a month, put that figure in: it implies roughly a tripling every year. Then compare with the realistic range in your own journal. The result is not a target to chase, and chasing a figure like that is a common route to oversized risk. Compounding is also the reason that protecting capital in a bad month often matters more than squeezing extra from a good one.

If you want a defensible number to plug in, use the median monthly result from at least a year of your own trades, then run the calculator again with a figure half as large to see how much of the projection depends on the assumption. See win rate, profit factor and expectancy explained for the trade-level numbers that sit behind a monthly figure.

Compare the figures in this page with the monthly results in your own journal before you draw any conclusion. If your best month in the last year was +4% and your median was +1%, the 5% row above is a description of something you have never done, and the 1% row is the honest starting point.

Costs eat into compounding too: the trading cost calculator shows what share of each target goes to commission, spread and swap.

Frequently asked questions

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