Tool

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.

Smooth projection—

Smooth projection — arithmetic on your assumption—

Total growth under it—

With your stated swing — drag-adjusted—

What the swing costs the smooth curve—

This computes in your browser and needs JavaScript. The arithmetic: balance times (1 + r) to the power of n for the smooth curve, where r is a per-period return you assume. The drag row replaces r with approximately r minus half the squared per-period swing — the geometric mean a volatile return actually compounds at — and the gap between the two finals is what volatility costs the projection.

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.

Volatility drag — the row the curve hides

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.

What this does not do

It 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.