Compounding calculator

Ending balance = starting balance × (1 + monthly return) ^ months. Every calculator on this site shows its working, because a number you cannot reproduce by hand is a number you cannot check when it looks wrong.

£5,000 compounding at 2% a month reaches roughly £6,341 after twelve months, assuming nothing is withdrawn.

Two adjustments matter in the UK. First, account currency: if your account is in sterling and the instrument settles in dollars, every result is converted at the prevailing rate, so it moves as the rate moves. Second, contract size: not every instrument uses 100,000 units, and index and commodity contracts differ from FX entirely.

The most frequent error is working backwards from the margin available rather than forwards from the stop. Available margin tells you the largest position you are permitted to take; it says nothing about the largest position you should take.

The second is ignoring costs. Spread, commission and overnight financing come out of the same account as the loss you sized for, and on short-stop intraday strategies the cost can exceed the risk you calculated.

The third is treating a compounding projection as a forecast. A steady monthly return is a modelling convenience, not a description of how trading accounts behave; real equity curves include drawdowns that break the arithmetic.