How compounding works
Compounding means you earn returns on your earlier returns. A balance that grows 2% a month does not grow by the same amount each month. It grows by 2% of a larger number each time, so the curve bends upward. Adding regular deposits speeds this up, because every deposit starts earning immediately.
The calculator shows the final balance, how much you put in, how much is growth, and how long the money takes to double. The dashed line shows the same plan at half the return, which is a useful reality check. Small differences in return become large differences over years.
Monthly or yearly
Choose whether the return you enter is per month or per year. A yearly return is converted to an equivalent monthly rate so the compounding is exact.
A word of caution
The model assumes a constant return every month. Real trading returns are uneven, include losing months and drawdowns, and may not be sustainable. A figure like 5% a month compounds into numbers that almost no one achieves for long. Use conservative inputs, and use the strategy simulator to see how uneven results change the picture.
The formula
doubling time = ln(2) ÷ ln(1 + r)r is the monthly return as a fraction. Deposits are added at the end of each month. A yearly rate R becomes (1 + R)^(1/12) − 1 per month.
Worked examples
A $5,000 account with monthly deposits
Start with $5,000, add $200 a month and earn 2% a month for 5 years. You deposit $17,000 in total. The balance reaches about $39,215, so most of the final balance is growth.
The effect of half the return
The same plan at 1% a month ends at about $25,417, less than half of the first result, even though the return only halved. Compounding amplifies small differences in return.
The rule of 72
At 1% a month a balance doubles in about 70 months. A quick check: divide 72 by the percentage return per period. 72 ÷ 1 = 72 periods, close to the exact figure.
Frequently asked questions
What return should I use?
Use a conservative figure you could sustain, not your best month. Many professional traders target well below 5% a month. Compare a few values using the half-return line on the chart.
Does this account for losing months?
No. It assumes the same return every month. Real results fluctuate. The strategy simulator models randomness and shows the range of outcomes.
How is the yearly return converted to monthly?
A yearly return R becomes (1 + R)^(1/12) − 1 each month, so twelve months of compounding give exactly R.
When are deposits added?
At the end of each month, after that month's return. Deposits made earlier would add a little more growth.
What is the rule of 72?
A shortcut for doubling time: divide 72 by the return per period. At 2% a month it is about 36 months. The calculator shows the exact figure.
Is compounding realistic for traders?
It is for traders who keep risk as a fixed share of the account and keep winning. But profits need to be real and drawdowns controlled. Compounding also magnifies losses, so manage risk first.
Compounding rewards consistency.
Steady results beat spectacular ones. These indicators are built to keep you consistent and out of trouble.
Last updated October 2026. For education only. Not financial advice. Results depend on your inputs and cannot predict future performance.