How it works
Compounding applies an assumed periodic return repeatedly to the balance. The period label describes the assumption’s frequency; it does not convert a monthly rate to another frequency.
The formula
Keep currency, units and time periods consistent. Percentage inputs use percentage points (enter 5 for 5%). Results are rounded only for display; tiny nonzero values may use scientific notation. Undefined ratios are shown as unavailable.
Starting balance: $5,000; Assumed return per month: 2.0%; Periods: 12 months; Recurring deposits: $0; Modeled ending balance: $6,341.21; Modeled gain: $1,341.21; Cumulative modeled return: 26.82%.
Calculation method
Beginning-of-period contributions participate in that period’s return. End-of-period contributions enter afterward. Withdrawals are negative cash flows and cannot take the modeled cash balance below zero.
Interpretation
The balance table separates contributions from modeled trading gains. The displayed cumulative return compounds the return assumption without cash flows; it is not a money-weighted performance measure.
Limitations
Real trading returns vary and include losing periods. This model assigns no probability to the assumed path. An optional final drawdown is an additional loss applied once at the end, not an estimate of the worst historical or future drawdown.
Method and reference sources
Method and content checked 2026-09-20. These sources provide background, not endorsement or professional certification. The formula and limitations above define this calculator.
- CME Group — Calculating futures profit or lossContract size and price-movement context; verify your broker or exchange specification separately.
- Investor.gov — Understanding FeesInvestment fee and compounding context; enter the terms of your fund or account.
Frequently asked questions
Can I treat the compounded balance as an expected return?
No. A constant periodic return is a scenario assumption. Real returns vary, may be negative and can interact with contribution timing.
What is a worked example for Trading Compounding?
Starting balance: $5,000; Assumed return per month: 2.0%; Periods: 12 months; Recurring deposits: $0; Modeled ending balance: $6,341.21; Modeled gain: $1,341.21; Cumulative modeled return: 26.82%.