Forex compounding calculator
Compounding turns a modest per-period return into a large multiple, given enough periods. This shows the mechanics, with the caveat that no account produces the same return every month.
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Ending balance = start × (1 + rate)^periods. $1,000 growing 5% a month for 24 months becomes about $3,225. The account roughly triples, without a single month above 5%. That is the whole argument for compounding, and the reason it is so easy to sell people an unrealistic version of it.
Key takeaways
- This is arithmetic, not a projection. It assumes an identical return every period, which no trading account has ever produced.
- Compounding is the mechanism behind every "turn $500 into $50,000" pitch. The mechanism is real; the constant input is fiction.
- A fixed percentage return on a growing balance requires a growing position size, which brings liquidity, slippage and psychology into play.
- Losing periods do more damage than winning periods of the same size do good. See the drawdown calculator.
How compounding works
Compounding means each period's return is calculated on the balance produced by the previous period, so gains earn gains. The formula is:
Final = Start × (1 + r)n
The exponent is what makes it non-obvious. Five percent a month is not 60% a year, it is about 80%. Over three years it is not 180%, it is roughly 480%. The gap between the intuitive linear answer and the real one grows with every period, and it is why people underestimate long horizons and overestimate short ones.
Why this number is not a forecast
Every assumption the calculation makes is false for a real trading account, and it is worth being explicit about which:
- Returns are not constant. Real equity curves have flat months and losing months. A sequence averaging 5% with a −15% month somewhere in it ends materially below the smooth version, because the loss compounds too.
- Position size has to grow. Holding a 5% monthly return on a balance that has grown tenfold means trading ten times the size. Slippage grows, and so does the psychological weight of each trade.
- Sequence matters. The same set of returns in a different order produces the same final figure only if no capital is added or withdrawn. Add deposits and order starts to matter a great deal.
- Costs are ignored. Spread, commission, swap and taxes all compound against you.
Use this tool to build intuition about the shape of exponential growth, and to sanity-check claims. If someone advertises 20% a month, this calculator says $1,000 becomes $8.9 million in five years. Being able to produce that number quickly is the fastest way to recognise a claim that cannot be true.
Trading involves risk of loss. Past performance is not indicative of future results, and no return is guaranteed.
The same calculators are inside the MarketPro app
MarketPro ships position size, pip value, margin, profit, risk-to-reward and compounding calculators alongside the signal feed, so you can size a trade on the same screen you read it on. Download free. Vetted free signals every week, no card needed.
Forex compounding calculator: questions
Is 10% a month realistic in forex?
Should I compound or withdraw my profits?
What return per period should I enter?
Size the trade, then take the trade
MarketPro publishes every signal with an explicit entry, stop and take-profit levels, which is what makes these calculations possible before you click. Start with the free weekly signals.
Not investment advice. Past performance is not indicative of future results.