Monthly division of the trading system’s profitability and the total balance profit. Forex news It clearly shows how fast the profit is growing with or without reinvestment.
- In others words, it is an Excel spreadsheet for calculating the compound interest paid on an investment, at a given rate of interest, for a given number of years.
- The second variable you need to define is the percentage you will make per each period.
- Now, If I take the same results for four weeks per month I would end up with 4% at the end of the month.
- Note that calculations using the Forex Compounding Calculator assume that any additional contributions are made at the end of the period.
- If your earnings are not reinvested, then the growth of your investment will become linear.
Whether the base currency for your trading is US dollar, UK pound, Euro or any other currency, you’ll find our forex compounding calculator works for you. If you’re trading in cryptocurrency or any currency whose symbol isn’t represented, simply select the blank square in the currency options. These example calculations assume a fixed percentage yearly interest rate.
Calculating Forex Earnings
If that is 2% it stays the same all the time, but the profit increases. That can be 1% per month or 2% per month or any other percentage as I have already mentioned. You will get the results in the table where you can see how much you would get after each time period. That means if you open one trade on a $ account balance and that trade is a successful trade you will make $200 which is 2%. And now, to find out how much our account balance will grow, we hit the red “Calculate” button.
One of the drawbacks of the Forex compound interest calculator with reinvestment is that it suggests adding profit to the balance only once a month. Because of the reinvestment in the second example, the trader earned over three months a profit that is 0.76 USD more than that if dotbig review without reinvestment. One of the methods to assess the efficiency and performance of a trading strategy is to analyze its profit/risk ratio. The performance in terms of certain periods can be seen in the backtest. Compounding works in all markets, not just foreign-exchange.
How To Use Compounding Gains Calculator?
No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. Now, when we calculate monthly compounding for a forex account, the rate you enter is not a yearly percentage rate that must be translated to get the monthly equivalent. It’s the exact percentage gain you achieve each month. To benefit from compounding, you must be a profitable trader and leave some of your trading profits in your account. The increased account size will consistently boost future gains from your trading, assuming that you don’t stop reinvesting. I will recommend you to not do compounding daily or per trade because if you are winning one trade, maybe you lose the next two trades.
You can use different compounding frequencies and see how compound interest works in Forex trading. The best compound effect graph is the one below where you can see how three different compounding effects have different results. Compound interest is the eight wonders of the world with exponential return where you reinvest what you have earned. Now, if you compare monthly return with annual return you see that https://www.forexlive.com/ monthly return has more than 10% of return and annually has only 1%. Now, If I take the same results for four weeks per month I would end up with 4% at the end of the month. If you open two trades then both trades would need to be positive or at least one positive and second trade without loss. Here is the step by step of the Forex calculator compound with the compounding rules I have mentioned above.