Simple vs. compound returns
Simple return always calculates gains against the original principal; compound return calculates the next gain against the amount that already includes previous gains. If you reinvest your full balance on every trade, growth naturally compounds.
The power of compounding, in numbers
Starting from 100 and compounding a 2% gain over 100 trades ends up around 724. The same conditions calculated as simple return only reach 300. The gap between the two grows exponentially as trade count increases.
Compounding cuts both ways
- Losses compound too — losing the same percentage from a smaller account makes recovery harder
- A single large loss can significantly set back the entire compounding curve
- That’s why avoiding large losses comes before chasing consistent gains, if you want to capture the compounding effect
Check your own compounding trajectory
Plug your average return and trade count into the journal’s compound calculator to simulate where this pace leads long-term. It helps you set goals based on numbers instead of gut feeling.
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