Forex compounding calculator
Compounding arithmetic is real and worth doing. What the usual version hides is that its input is an assumption — no account returns a fixed percentage per period — and that the smooth curve is not even the right average: returns that swing compound to less than the same mean delivered smoothly. This computes the projection, labels it as arithmetic on your assumption, and prices the swing — the row the curve never shows.
This is arithmetic, not a forecast
Every figure in the panel is a consequence of the numbers you typed, and of nothing else. The calculator has no opinion about whether your assumed return is achievable, because no page can have an honest one: a per-period return is a measurement that needs a sample, an account and a period, and an assumption typed into a form has none of the three. What the arithmetic is good for: seeing what a rule of thumb implies, pricing a target against a horizon, and noticing how violently the exponent treats small changes in the assumption — the difference between two nearby monthly figures, compounded over years, is routinely the difference between a result and a fantasy.
How does volatility drag affect compound returns in forex trading?
A return that averages some figure with swings around it compounds to less than the same average delivered smoothly: up ten then down ten is not flat, it is minus one percent, and the loss compounds.
The drag is approximately half the squared per-period swing, subtracted from the mean — small when the swing is small, and decisive when it is not. Ranking compounding calculators omit it entirely, which is how a volatile strategy and a smooth one with the same average project to the same balance on every other page while arriving at different ones in life. Supply a swing above and the panel prices the gap; the estimate is a second-order approximation and says so in the working line.
How do you calculate compound growth with variable returns?
With a steady return r per period, the smooth curve is the starting balance times (1 + r) to the power of the number of periods, which is what this page computes. With returns that swing around the same mean, the balance compounds at approximately r minus half the squared per-period swing, the geometric mean a volatile return actually compounds at, so the same average compounds to less.
How does standard deviation impact compounding results?
The standard deviation of the per-period return is the optional swing input above, and the drag it causes is approximately half its square, subtracted from the mean: small when the swing is small, and decisive when it is not. Supply it above and the drag row prices what the smooth curve hides.
Why do compounding calculators give different results from actual trading?
A compounding calculator's usual input is an assumption, and no account returns a fixed percentage per period. Returns that swing compound to less than the same mean delivered smoothly, so a volatile strategy and a smooth one with the same average project to the same balance on a calculator that omits the drag, while arriving at different ones in life. The order in which good and bad periods arrive also changes the path and, against a drawdown rule, can end an account the average says should have survived: the risk of ruin calculator treats that question.
What this does not do
The forex compounding calculator does not project deposits or withdrawals — a schedule of contributions is bookkeeping this page would do badly and your broker's statement does exactly. It does not model the sequence of returns beyond the drag approximation: the order in which good and bad periods arrive changes the path and, against a drawdown rule, can end an account the average says should have survived — the risk of ruin calculator treats that question properly, from a sample size. And it will not suggest a return. The blank field is the entire editorial position.
The floor a projection has to live above is the trailing drawdown calculator; whether a run of losses ends the account before the average arrives is the risk of ruin calculator; and whether a backtest's average was ever real is what the Overfit Auditor bounds. The full list is under calculators. And when the inputs cannot support an answer, the panel above refuses and says why rather than rendering a zero — why an instrument refuses to answer is that design, written down.