Compounding Calculator
What consistent returns actually do.
Input a starting balance, a monthly return, and a time horizon. See the compounded growth curve month by month. This tool is a reality check for traders chasing moonshots — and a motivator for disciplined traders planning years out.
Monthly breakdown
| Month | Balance | Gain from start |
|---|---|---|
| 0 | $1,000 | +$0 |
| 2 | $1,103 | +$103 |
| 4 | $1,216 | +$216 |
| 6 | $1,340 | +$340 |
| 8 | $1,477 | +$477 |
| 10 | $1,629 | +$629 |
| 12 | $1,796 | +$796 |
| 14 | $1,980 | +$980 |
| 16 | $2,183 | +$1,183 |
| 18 | $2,407 | +$1,407 |
| 20 | $2,653 | +$1,653 |
| 22 | $2,925 | +$1,925 |
| 24 | $3,225 | +$2,225 |
What it is
A compounding calculator shows how a balance grows when returns are reinvested each period. Starting with $1,000 at 5% per month doesn't look like much — until you see the balance at month 24. The math is brutal in both directions: it rewards consistency and punishes drawdowns. This tool also lets you add monthly deposits to model DCA-style account growth.
When to use it
When setting realistic goals for the next 12-24 months. When deciding whether to withdraw profits or let them compound. When comparing the real value of a 'low' monthly return versus a 'high' one — 3% per month compounded for 3 years is a different number than most traders expect.
The formula
Without deposits: Ending balance = Starting × (1 + monthly return)^months With monthly deposits: Month N balance = (Month N−1 balance × (1 + r)) + deposit Example: $1,000 starting, 5% monthly return, 24 months Ending = $1,000 × (1.05)^24 = $3,225 Total gain = $2,225 (222% return on invested) Example with deposits: $1,000 starting + $500/month, 3% monthly, 24 months Ending ≈ $19,500
How to use it
- 1. Enter a REALISTIC monthly return
Most consistent retail traders make 2-5% per month when they have a proven system. Prop firm managers shoot for 1-2% per month. 10%+ per month is not sustainable — the handful of people who hit those numbers blow up on the eleventh month.
- 2. Pick a time horizon that matters
12 months to see the first real compounding effect. 24-36 months to see the curve bend. 60 months to see why Warren Buffett said 'time in the market beats timing the market.'
- 3. Add a monthly deposit if you're still funding the account
If you're putting $200 a month into the account on top of trading profits, enter that. It dramatically changes the curve, especially in the early months.
- 4. Look at the growth curve, not just the ending number
The shape matters. A flat early period that suddenly curves up is compounding doing its work. This is what patience actually looks like.
Common mistakes
- ✗Using fantasy return rates. If you input '30% monthly,' the calculator will happily return a $1M number — but you will never actually hit that rate consistently. Stick to 2-5%.
- ✗Assuming returns are linear. Trading P&L is lumpy — some months are big, some are losses. The calculator shows smoothed average growth. Reality looks more jagged.
- ✗Forgetting that drawdowns reset compound. A 20% drawdown doesn't just cost you the 20% — it costs you the compound growth that money would have generated over the remaining months.
- ✗Treating compounding as a get-rich-quick plan. Compounding is boring until month 18, then it becomes magic. Most traders quit before month 6.