Compounding calculator for trading accounts

Worked example

You start with $1,000, make an illustrative 5% a month and add $100 at the end of each month. After 12 months the balance is $3,387.57. You paid in $1,200.00, so the returns earned $1,187.57.

Without the deposits the same 5% a month turns $1,000 into $1,795.86, which is 1.80x the start. At 5% a period a balance takes 15 periods to double.

Steady returns are the unusual part. A real account has losing months, and a 20% loss needs a 25% gain to get back, which the drawdown recovery calculator shows. Treat the result as the best case of a plan, not a forecast.

The formula

Each period: balance = balance × (1 + return), then + the amount added, then − the amount taken out. With the same amounts every period that comes to start × (1 + r)ⁿ + (added − taken out) × ((1 + r)ⁿ − 1) ÷ r.

A period is whatever you choose: a day, a week, a month or a trade. Keep the return and the deposits in the same unit. Withdrawals never take more than the account holds, and an account that reaches zero stops there. Time to double counts whole periods at your return with nothing added or taken out.

Questions and answers

How do you calculate compound growth on a trading account?

Multiply the balance by one plus the return, once per period. $1,000 at 5% a month for 12 months is $1,000 × 1.05¹² = $1,795.86.

How do deposits change the result?

Each deposit compounds from the period it goes in. Adding $100 a month to the same $1,000 at 5% a month ends the year at $3,387.57 instead of $1,795.86.

How long does it take to double an account?

At 5% a period it takes 15 periods. A quick check is the rule of 72: divide 72 by the return in percent. 72 ÷ 5 = 14.4, and the exact count rounds up to the next whole period.

Is a steady monthly return realistic?

Rarely. Returns come in uneven steps with losing stretches in between. The calculator shows what a rate would do if it held, which is useful for planning and for seeing how much a lower rate changes the end.

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