Performance
How a fixed monthly return compounds an account balance over time.
How a fixed monthly return compounds an account balance over time. The page states the equation, the units it expects and the rounding it applies, so the result can be reproduced by hand.
A calculator gives you a number. This one feeds the next: account to risk, risk to position size, position size to the trade, and the trade to expectancy, drawdown and risk of ruin.
See the performance tools →Compounding is why drawdowns cost more than they appear: every period spent recovering is a period the exponent is not growing.
$25,000 at 2% per month for 24 months:
A 2% monthly return is 26.8% annualised, not 24% — the difference is the compounding itself.
As a long-run average, rarely. It compounds to 26.8% a year, which is above what most professional managers sustain.
Because losses need larger gains to undo. A sequence of +50% and −50% averages zero but ends 25% down.
Compounding grows the account faster and grows the drawdowns with it, since position size scales with equity. Withdrawing fixes the loss in dollars and slows the growth. Neither is wrong; they are different objectives.
A calculator answers one question and raises the next. These are the ones this figure feeds into.
Peak-to-trough decline, and the gain required to climb back out of it.
Return per unit of volatility, and what the ratio does not tell you.
Average outcome per trade from win rate and average win and loss. The number win rate hides.
Compounding Calculator · rounding shown to the precision displayed