Compound Interest Calculator
See how your trading capital grows over time with the power of compound interest. Enter your starting capital, expected monthly return, and time horizon — visualize the long-term impact of consistent returns.
The Power of Compounding
Compound interest is when your profits start earning profits. Albert Einstein supposedly called it "the eighth wonder of the world." For traders, this means that consistent returns — even modest ones — produce extraordinary results over time.
The compound formula: A = P × (1 + r)^n
- A = Final balance
- P = Principal (starting capital)
- r = Monthly return (as decimal)
- n = Number of months
Example: $10,000 at 3% per month over 5 years (60 months) = $10,000 × (1.03)^60 = $58,916. That's nearly 6x your starting capital from "just" 3% per month.
Realistic Expectations for Traders
While the math of compounding is beautiful, achieving consistent monthly returns is hard:
- 1-2% per month: Achievable with disciplined risk management. Beats most hedge funds long-term.
- 3-5% per month: Skilled active traders. Requires consistent execution and a real edge.
- 10%+ per month: Extremely rare and usually unsustainable. Most who claim this are exaggerating or in bull markets.
- Drawdowns: Losing months are inevitable. Compound interest assumes consistent positive returns, which never happen in reality.
Use this calculator to set realistic goals, but remember: trading is not a savings account. Returns are not guaranteed.
Frequently Asked Questions
How does compound interest work in trading?
When you make a profit, that profit is added to your account. Your next trade is sized based on the new, larger balance, so even the same percentage return produces a larger dollar amount. Over time, this exponential growth compounds dramatically.
What's a realistic monthly return for traders?
1-3% per month is realistic for skilled, disciplined traders with proper risk management. Higher returns are possible in bull markets but rarely sustainable. Most retail traders lose money — the realistic baseline is breakeven, not 10% per month.
Should I withdraw profits or compound them?
Compounding produces faster account growth, but withdrawing profits reduces risk and locks in gains. A common approach is to compound until you reach a target balance, then start withdrawing a portion of monthly profits while continuing to grow the base.
Why is compounding so powerful?
Because growth becomes exponential, not linear. $10,000 at 3% per month is $300 in month one, but $580 in month 24, and $1,720 in month 60. Each month's profit is bigger than the last because the base keeps growing.
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