Compounding calculator
This compounding calculator shows how a starting balance changes with a fixed return each period and optional regular contributions. Your account keeps each period's gain, which then earns a return during the next period. Add your figures to watch the balance increase one period at a time.
Monthly returns in a compound growth calculator
Compounding involves keeping your gains in the account when each period ends. Your percentage return for the next month then applies to the higher balance. Rather than withdrawing profit, you leave past earnings to grow with your original deposit.
Each new deposit becomes part of the running total when you also make regular additions. Period by period, the compound growth calculator records your starting cash, extra deposits and gains that you reinvest.
How do you calculate compounding?
For 1 period of growth, add 1 to your decimal return rate, then multiply that result by your starting balance. For several periods, multiply your starting balance by the growth factor raised to the number of periods.
When extra deposits are left out, the symbolic form is Ending Balance = P × [1 + r]^n. In this formula, P means your starting balance, r means the decimal return rate for each period and n means the number of periods.
A fixed deposit of PMT added at the end of every period also compounds. The value of those additions is PMT × [[1 + r]^n minus 1] / r. Add this amount to the compounded starting balance.
A worked example of monthly compounding
Suppose you begin with £100, earning a steady 10% every month across 2 months. Month 1 gives you a £10 gain from the starting £100. During month 2, you earn another £10 from the starting £100 and £1 from the 10% return on month 1's £10 gain.
Over those 2 months, your starting £100 produces £20 in basic gains and £1 in extra growth from compounding. Regular additions work the same way: put another £100 in once month 1 closes, and that deposit brings in £10 of its own during month 2.
| Month | Gain from starting £100 | Extra gain from compounding | Extra gain from £100 added after month 1 |
|---|---|---|---|
| 1 | £10 | £0 | £0 |
| 2 | £10 | £1 | £10 |
| Total over 2 months | £20 | £1 | £10 |
Target returns compared with real trading results
Any percentage target you enter in the tool is a mathematical assumption rather than a forecast. Savings accounts have a set interest rate, but forex and other market trading returns vary.
Real trading brings losing days, spreads and overnight financing charges, and all of them cut your balance. Even 1 large loss reduces the capital available for growth in later months. During a losing run, a drawdown occurs when your account falls from a peak to a low point. We make our drawdown calculator available so you can check the gain needed to regain your funds after a loss.
Use our forex profit calculator to check the result of 1 trade. Another option lets you test your strategy on a demo forex account and observe uneven monthly returns