Compounding & Drawdown Calculator
Project how a trading account grows when profits compound month over month, and see exactly how hard it is to recover from a drawdown. Two calculators, one page.
Final balance
$32,251
Total profit
$22,251
Total growth
223%
The two forces that decide your account's future
Compounding is the upside force: reinvested profits mean every month's return is earned on a bigger base. Even a modest 5% monthly return more than triples an account in two years, and small differences in monthly return produce enormous differences over time.
Drawdown is the downside force, and it is asymmetric. A 20% loss needs a 25% gain to recover. A 50% loss needs 100%. Deep drawdowns do not just cost money, they cost the time compounding needs to work.
This is why serious automated systems cap drawdown first and let compounding do the rest. Every LazyAlgos EA ships with hard daily and total drawdown limits for exactly this reason.
Frequently asked questions
How does compounding work in trading?
Compounding means each month's profit is added to your balance, so the next month's percentage return is calculated on a larger amount. At 5% per month, $10,000 grows to about $17,958 in 12 months and $32,251 in 24 months, far more than the $6,000 or $12,000 simple, non-compounded gains.
What is drawdown in trading?
Drawdown is the decline from your account's peak to its lowest point, expressed as a percentage. A $10,000 account that dips to $8,000 before recovering has experienced a 20% drawdown.
Why does a 50% loss need a 100% gain to recover?
Losses and gains are asymmetric because the gain is calculated on the smaller, post-loss balance. Losing 50% of $10,000 leaves $5,000, and $5,000 must double (a 100% gain) just to get back to $10,000. This is why controlling drawdown matters more than chasing returns.
What is a realistic monthly return for automated trading?
It depends entirely on risk settings. Aggressive systems may target 10%+ monthly with deep drawdowns, while conservative ones target 3 to 7% with tighter limits. Treat any projection as illustrative, past performance never guarantees future results.
Want the compounding without the screen time?
Our Expert Advisors trade XAUUSD automatically with built-in drawdown protection, so the math on this page can work for you around the clock.