Compounding Calculator
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See how a consistent return per period grows an account balance over time through compounding — small, repeatable gains, not one big win.
How compounding builds the balance, period by period
Compounding means each period's return is earned on the balance as it stands now, including every earlier gain. The calculator applies one fixed percentage return to the starting balance, then to the new balance, for the number of periods you enter. A period can be a day, a week, a month or a year, as long as the rate you type is the return for that same period.
Take a $5,000 starting balance, a 2% return per month and 12 months. The first three months, rounded to the cent at every step, run like this:
Repeating that step twelve times is the same as raising 1.02 to the 12th power, which is what the calculator does for the full result:
Compounding versus a simple return
A simple return always earns the same percentage of the original $5,000. At 2% that is $100.00 a month, or $1,200.00 over 12 months. Compounding produced $1,341.21, so the extra $141.21 is gain earned on earlier gains.
That gap is small in the first year and widens quickly, because the exponent does more of the work the longer the horizon runs.
How the result changes with the rate
The same $5,000 over the same 12 months, at three different monthly rates:
- 0.5% per month: 1.005^12 = 1.061678, so the final balance is $5,308.39
- 1% per month: 1.01^12 = 1.126825, so the final balance is $5,634.13
- 2% per month: 1.02^12 = 1.268242, so the final balance is $6,341.21
Quadrupling the rate from 0.5% to 2% does not quadruple the gain: $1,341.21 against $308.39 is about 4.3 times. Treat the rate as a what-if input to test, not as a forecast of what a strategy will deliver.
How long to double: the rule of 72
Dividing 72 by the rate per period gives a quick estimate of how many periods it takes a balance to double. At 2% per period that is 72 / 2 = 36 periods. The exact answer is 35.0 periods, so the shortcut lands within one period.
You can confirm it by setting the periods field to 35. The result is $5,000 x 1.02^35 = $5,000 x 1.999890 = $9,999.45, a hair under double.
One bad period works against you
Compounding is symmetric: a loss is taken from the larger balance, so it removes more dollars than an equal-sized gain added. Suppose the 2% months run for 11 months, then one month loses 10%:
One losing month erased roughly half of eleven good ones. The Drawdown calculator shows how much of a gain is then needed to get back to the old peak.
Milestones on a longer horizon
The same $5,000 at 2% a month, checked at later points, shows how the exponent takes over:
- 12 months: 1.02^12 = 1.268242, balance $6,341.21
- 24 months: 1.02^24 = 1.608437, balance $8,042.19
- 36 months: 1.02^36 = 2.039887, balance $10,199.44
- 60 months: 1.02^60 = 3.281031, balance $16,405.15
The first doubling takes 35 months, but the balance then goes from $10,199 to $16,405 in the next 24 months. Gains that look slow early on speed up only because the base underneath them has grown.
Working backwards from a target
Suppose you want to reach $8,000 from $5,000 and assume a steadier 1.5% a month. The required growth factor is $8,000 / $5,000 = 1.60, and you are looking for the number of periods n where 1.015^n reaches 1.60.
Type 31 and then 32 into the periods field to see the same two balances. The answer is 32 months, and it shows that the target depends far more on the rate you assume than on the starting amount.
Where a monthly rate comes from
A monthly rate is the end of a chain, not a starting assumption. Say a trader risks 1% per trade on a strategy that averages +0.2R per trade, which is +0.2% of the account per trade, and takes 20 trades a month.
Entering 4.08 as the rate gives the compounding result for that strategy. If the true average were +0.1R, the same maths gives 1.001^20 = 1.020191, or +2.02% a month. An uncertain edge that is half the size you assumed halves the monthly rate and cuts the final balance by far more than half over several years.
Measure the edge first with the Win Rate calculator, then enter a conservative rate here.
What this calculator leaves out
The calculator holds the rate constant and charges no spread, commission or swap. Deposits, withdrawals, tax on the interest and inflation only count if you switch them on, and tax is taken once a year from that year's interest. The return figures are the money-weighted return (IRR), which reflects when you added or withdrew money, and the time-weighted return, which ignores the timing of your deposits and shows the rate itself. Real trading returns are uneven from one period to the next, and some periods are losses. Use the result to see how steady, repeatable returns scale, and pair it with the Risk of Ruin calculator and the Win Rate calculator before drawing conclusions about a real strategy.
Adding regular deposits or withdrawals
Set Regular contributions to deposits or withdrawals, then enter the amount, how often it happens and whether it is paid at the start or the end of each period. Deposits at the start of a period earn interest for that whole period, so the final balance is slightly higher than with end-of-period deposits.
The optional yearly increase raises the amount at the start of every new year, which is useful for a deposit that follows your income or inflation. The breakdown table under the calculator shows, for each day, week, month or year, the money added or taken out, the interest earned and the balance.
With withdrawals, the balance stops at zero: the calculator never takes out more than is left.
Frequently asked questions
Does my broker's leverage change the lot size I should trade?
No — broker/account leverage is a cap on how large a position you're allowed to open, not an input to position sizing. "Actual leverage" (your position's notional value ÷ your balance) is usually far below your account's maximum — leverage available and leverage used are two different numbers.
Why won't my platform accept the exact lot size this shows?
Most brokers round to a minimum lot step (commonly 0.01). If the calculated size falls between steps, round down to stay within your risk budget, never up.
My platform rejects the trade even at a rounded lot size — why?
That is usually a separate, broker-set maximum position size per trade or per account, not the same limit as the lot-step rounding above. Check your broker's own contract specification page for a maximum volume figure, and split the trade across multiple positions if you are still genuinely within your own risk budget.
Is "lot size" the same as "position size" here?
Yes — on this site the two terms are used interchangeably for index and forex CFDs; both mean the number of lots to trade.
How do I count a "point" move on NAS100?
NAS100 moves in steps of 1, not the 4-decimal "pip" convention EUR/USD uses — a 1 change in the raw price is one full point/pip here. This calculator already accounts for that; it never assumes the generic forex definition.
Does higher leverage make my account compound faster?
No. Leverage only sets how much margin your broker holds and the largest position you are allowed to open. Growth per period comes from the position size you actually trade relative to your balance, and from the strategy's edge. A 2% monthly return is the same 2% whether the account is set to 1:30 or 1:500; the higher leverage just lets you open positions big enough to lose far more than 2%.
Should the rate be monthly or yearly?
Either, provided the rate and the number of periods use the same unit. A 24% yearly rate over 3 periods means 3 years; a 2% monthly rate over 36 periods means 3 years too, but the two give different results because the monthly version compounds twelve times a year: 1.02^36 = 2.0399 against 1.24^3 = 1.9066.
Can I add monthly deposits or withdrawals in this calculator?
Yes. Under Regular contributions choose deposits or withdrawals, enter the amount and how often it is paid (daily to yearly), and pick start or end of period. You can also raise the amount every year, and the breakdown table shows each period.
What rate should I enter for a realistic scenario?
Use a figure you have measured rather than hoped for, and test a low and a high case. A rate derived from your own trade log, for example +0.1R per trade at 1% risk and 20 trades a month, gives 2.02% a month; doubling the edge gives 4.08%. Running both shows how sensitive the final balance is to the assumption.