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Forex Compound Growth Calculator — Account Projection
How compound growth is calculated
Ending Balance = Starting Balance × (1 + r/100)^n [no withdrawal]
With per-period withdrawal w:
bal_t = bal_{t-1} × (1 + r/100) − w
Where:
r = return percentage per period (e.g. 2 for 2%)
n = number of periods
w = withdrawal amount per period (in same currency as balance)Compound growth is exponential because each period's return is computed on the previous period's ending balance, including prior gains. The math is identical regardless of frequency — what matters is the per-period return rate. A 2% monthly return is NOT equivalent to 24% annual return: 1.02^12 = 1.268, so monthly 2% compounds to ~26.8% annually. Conversely, 12% annual compounded monthly is 0.949% per month (because 1.00949^12 = 1.12). Always match the input rate to the input period — don't mix monthly returns with yearly periods. With withdrawals, the math becomes a partial geometric series. Withdrawals applied after each period's return create a 'sinking effect' — the account grows then loses to withdrawals — leading to a slower, sometimes flat or declining trajectory. For trading accounts in production, regular withdrawals are operationally sensible (taking profits out of the trading account) but suppress compounding power. The trade-off is usually correct: long-term wealth comes from steady withdrawals plus a separate investment account, not from infinite compounding within a single trading account.
Worked example
Inputs
- Starting balance: $5,000
- Return per period: 2.0% monthly
- Number of periods: 24 months
- Withdrawal per period: $0 (compounding scenario)
Calculation
- Identify the multiplier: 1 + 2/100 = 1.02 per period.
- Compute the compound factor: 1.02^24 = 1.6084.
- Apply to starting balance: $5,000 × 1.6084 = $8,042.
- Compute total return percentage: ($8,042 − $5,000) ÷ $5,000 × 100 = 60.8%.
- Validate: 60.8% over 24 months annualises to 1.608^(12/24) − 1 = 26.8% per year — consistent with 2% monthly.
Result: $8,042 ending balance · 60.8% total return over 24 months (26.8% annualised)
Edge cases & special pairs
- Daily compoundingDaily returns are typically 0.05-0.15% for retail EAs. The compounding over a year (250 trading days) is meaningful: 0.1% daily = 1.001^250 = 1.284 = 28.4% annual. Daily returns above 0.3% are usually unsustainable; check the per-period rate's realism.
- Negative periodic returns (losing months)The formula handles negative returns naturally: a -3% month is multiplied by 0.97, not 1.03. For real EA trajectories, expect roughly 30-40% losing months even on profitable strategies. Plug an average return (e.g. +2% average across winning/losing months) for a smoothed projection.
- Variable return rateThe calculator assumes a CONSTANT periodic return, which is a simplification. Real EAs have variable returns that compound through Jensen's inequality — variable returns at the same average produce LOWER ending balance than constant returns. For volatile strategies, the actual ending balance can be 20-40% below this calculator's estimate even if the average per-period return matches.
- Withdrawal exhaustionIf withdrawal rate exceeds the period's gain, the account shrinks over time. At $5,000 starting, 2% monthly, and $200 monthly withdrawal: gain = $100, withdrawal = $200, net = −$100. Account hits zero in ~50 months. The calculator clamps the balance at zero so it doesn't show negative numbers.
- Realistic vs marketing returnsMarketing materials often quote 5-10% monthly returns. Realistic sustained retail EA returns are 1-4% monthly after costs and including losing months. Plug realistic numbers; the difference between optimistic and realistic ending balances is dramatic over 2-3 year horizons.
- Tax dragWithdrawals are sometimes used to fund tax payments rather than personal use. For US/UK traders, expect 20-37% tax on short-term forex profits, materially reducing the effective compound rate. Use the withdrawal field to model annual tax payments and see the real after-tax growth.
- Risk per trade scaling with balanceFixed-fractional sizing means position sizes scale with equity. A 1% risk on $5,000 is $50 lot exposure; on $50,000 it's $500. The 'same' EA produces 10× the absolute profit but the same percentage. The calculator's projection assumes the EA's percentage return holds — which is true for fixed-fractional, false for fixed-lot sizing.
When to use this calculator
Use this calculator to set realistic expectations for an EA's wealth-building trajectory. Most retail traders dramatically overestimate compound growth because they extrapolate the EA's best month into a year. The calculator forces explicit input of: starting balance, realistic per-period return, period count, and optional withdrawal. Plug conservative numbers (e.g. 1.5% monthly average, 60 months horizon, $200 monthly withdrawal for tax/expenses) and see what wealth this actually produces. Often the answer is sobering — and that's useful, because it shifts the planning focus to longer time horizons and bigger starting balances rather than expecting EAs to deliver life-changing returns in 12-24 months. The compound math also exposes the dramatic value of NOT withdrawing early — every $100 withdrawn in year 1 is roughly $250 forgone by year 5 at typical compound rates.
Related guide: How to size positions for compound growth →
Frequently asked questions
What's a realistic monthly return for a forex EA?
The reference: trend-following CTAs at the institutional level target 8-15% annual returns with 10-15% max drawdown — that's about 0.6-1.2% monthly average. Retail EAs claiming 5%+ monthly almost always have hidden risk (grid, martingale, or undisclosed leverage). When evaluating any EA, check the worst monthly return alongside the best — if there's a single -20% month in a 24-month track record, the EA's risk profile is dramatically worse than the average return suggests.
How do I convert monthly returns to annual?
The simple multiplication (2% × 12 = 24%) understates true growth because it doesn't account for return-on-return compounding within the year. The error grows with the monthly rate: 1% monthly multiplied gives 12% annual, but true compound is 12.68% — small error. 3% monthly multiplied gives 36%, true is 42.6% — meaningful error. Always use the compound formula for honest comparisons.
Why is my actual account growing slower than this calculator predicts?
Mathematically: the geometric mean of variable returns is always ≤ the arithmetic mean. If your EA averages +3%/-2% alternating months, arithmetic mean is +0.5%/month, but compound mean is √(1.03 × 0.98) − 1 = +0.42%/month. Over 24 months: arithmetic projection $5,000 × 1.005^24 = $5,635. Geometric reality: $5,000 × 1.0042^24 = $5,531. The $104 gap compounds over longer horizons. Always use the geometric mean for forward projections.
Can a $500 account grow to $5,000 in a year?
Realistic small-account growth: $500 with 3% monthly compounded (aggressive but achievable) over 12 months = $500 × 1.03^12 = $713. So $500 → $713 in 12 months. To reach $5,000 from $500 in a year requires 4x more compounding than retail strategies deliver. Either: (1) add capital, (2) take much longer than 12 months, (3) accept that the goal is wealth-building over years, not get-rich-quick.
Does compounding more frequently help?
Forex EAs naturally compound 'continuously' because each trade increments the equity, and the next trade's position size depends on current equity (with fixed-fractional sizing). So practical EA returns are effectively compounded at trade frequency, not monthly. The 'monthly return' figure in your projection is a summary of this continuous compounding. For matching the calculator's projection to live results, use the EA's reported monthly net P/L.
What's the right withdrawal strategy for a growing trading account?
The 'high-water mark withdrawal' rule: only withdraw when the account hits a new peak. Above peak, withdraw P% of the new gain (e.g. 50%) and leave the rest to compound. Below peak (in drawdown), withdraw zero. This rule outperforms fixed monthly withdrawal because it pauses extraction during drawdowns when the math is asymmetric — preserving capital for the recovery. Most professional money managers use a variant of high-water mark for trader compensation; retail traders should use it for personal withdrawals.