Utilize our Compounding Calculator to precisely model the potential growth of a trading account based on your selected trade profit percentage
A compounding calculator is a valuable tool that demonstrates how interest from a savings account or profits from successful trades can grow an account over time through a chosen percentage. It works by simulating the compounding process, which involves reinvesting a chosen percentage of gains into the account's total equity.
To see the significant impact of compounded gains, traders can input their initial account balance. For instance, let's assume:
Starting balance of 1,000 units of any deposit currency.
Number of Periods: Traders can model a series of consecutive successful trades, where each cycle could represent an interest accrual on savings, a profitable trade, and more. For example, a bank's monthly 5% interest payment would be a cycle of 1 month. Let's consider a sequence of 6 consecutive winning trades for this example.
Gain Percentage (per period): A critical input, this field mimics the percentage of gains in each cycle of compounding. It's flexible for various trading strategies – daily traders with a 0.05% return target, weekly traders targeting 1% return, or long-term traders aiming for 5% per trade. We'll use a 2% gain percentage per cycle in this case.
After inputting the values, click the "Calculate" button:
The Results: The calculator reveals the "Ending Balance" after compounding gains from 6 consecutive profitable trades, along with the "Total Gain" percentage. With an initial equity of 1,000 units of any account currency, compounding 6 trades with a 2% profit per cycle yields an ending balance of 1,126.16 units.
This underscores that by compounding just 6 profitable trades, each with a conservative 2% profit, the account balance grows by 12.6%.
The results also offer a comprehensive breakdown of each compounded trade's contribution to the balance increase, the cumulative percentage of each compounded trade, and the final account balance.