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Compounding shows the upside of a steady rate. The drawdown calculator shows the cost of one bad stretch and the gain needed to recover.
What is included
- The calculator, with your own numbers
- The formula written out
- A worked example you can reproduce
- Where grid, martingale and DCA bots break the maths
Who it is for
- People running or testing a trading bot
- Anyone sizing a position or checking costs
- Readers learning how the numbers work
- Not advice, and not for placing trades
Key facts
- Compounding means each period earns a return on the balance as it stands, including earlier returns. Final balance = start x (1 + rate) ^ periods.
- It is arithmetic on the numbers you type in. It is not a forecast, and no bot can promise the same return every period.
- Real returns come as a path with ups and downs. A single losing period can take back many periods of gains, because the loss is taken from the larger balance.
- A loss of X percent needs a gain of 1 / (1 - X) - 1 to recover. A 20 percent loss needs 25 percent. A 50 percent loss needs 100 percent.
- A bot advertised as "X percent a month" usually shows one number and hides the path, the worst month and the costs.
How the calculator works
Each period the balance grows by the return, and then any contribution is added. Repeat for every period.
With no contribution: final balance = start x (1 + rate) ^ periods
Gain needed to recover a loss of X = 1 / (1 - X) - 1
The calculator loops through the periods one at a time, so it also works for a negative rate. The losing period box applies one extra step at the end: the balance falls by that percent.
A worked example
Take a made-up $1,000 that earns 3 percent in each of 12 periods. After 12 periods it is 1,000 x 1.03^12 = $1,425.76, a gain of $425.76. Now add one losing period of 20 percent. The balance becomes 1,425.76 x 0.80 = $1,140.61. That one step removed $285.15, which is two thirds of the whole $425.76 gain. To get back to $1,425.76 the balance has to grow 25 percent, which at 3 percent a period takes about 8 more periods (1.03^8 = 1.27).
Why a longer horizon looks so large
The table below is the same $1,000. Only the rate changes. Over 36 periods, 3 percent a period does not give three times the gain of 1 percent. It gives more than four times as much, because the returns pile on returns.
| Return per period | Balance after 36 periods | Gain |
|---|---|---|
| 1 percent | $1,430.77 | $430.77 |
| 2 percent | $2,039.89 | $1,039.89 |
| 3 percent | $2,898.28 | $1,898.28 |
Each row is 1,000 x (1 + rate) ^ 36, calculated by us on 27 Oct 2026, exact. Nobody should read these as expected results. They show only what the arithmetic does when the rate holds, and a rate rarely holds.
Where bots break the maths
Compounding assumes the same return every period and a balance that is always free to grow. Trading bots break both assumptions.
- The path is hidden. A bot shown as "3 percent a month" is one average. A martingale or grid bot often produces many small gains and then one large loss, and the average hides which came when. Ask for the monthly list, not the headline.
- A loss is bigger than it looks. A 50 percent loss needs a 100 percent gain, not 50. See the drawdown calculator for the full table.
- Costs compound too. A cost of 0.5 percent per period is not subtracted once. It reduces the base for every later period.
- Raising size to compound faster raises the size of the bad period. Increasing size after wins is a common bot setting. It speeds up the gains on paper and makes the single bad period larger by the same factor.
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FAQ
Frequently Asked Questions
Is compounding a forecast?
No. It repeats one rate for every period, which real accounts do not do. The output shows what the arithmetic gives for the numbers you typed in, nothing more.
Why does a loss hurt more than the same gain helps?
Because the loss is taken from the larger balance and the recovery starts from the smaller one. A 20 percent loss needs a 25 percent gain, and a 50 percent loss needs a 100 percent gain.
Do contributions change the result a lot?
Early on they dominate: they are a large share of the balance. Over many periods the return does more of the work. The calculator shows total put in beside the gain so you can see the split.
What return per period should I enter?
This page cannot say. Use a number you can source from a long, costed record, and try a lower one beside it. If the answer changes a lot, the plan depends on a figure you do not know.
Why do bots advertise monthly percent returns?
A single monthly figure is easy to compare and hides the path. It does not show the worst month, the size of the open losses or the costs, which is where bots usually differ.
Are the numbers on this page real?
Example numbers are made up to show how the maths works, and the page says so. A figure only counts as exact when the page says it was calculated on a stated date. Nothing you enter in a calculator leaves your browser.
Can I use this to decide whether to run a bot?
It can show whether a bot's numbers hold together and how much an account can lose. It cannot say what the market will do, and it is not advice. Use it to ask better questions, then read the terms of your own broker or exchange.
Is this financial advice?
No. It is a calculator and general education. It does not consider your situation, and its output is only as good as the numbers you enter.
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