Forex compounding formula
Ending balance = P × (1 + r)n, where P is the starting balance, r is the percentage change written as a decimal, and n is the number of periods.
A simple compound example
A $1,000 balance modeled at 3% for 12 periods becomes about $1,425.76. That illustrates the formula only; it does not suggest a trader can produce 3% consistently.
Why drawdowns also compound
After a loss, the next percentage change applies to a smaller balance. A 50% loss then requires a 100% gain to return to the starting amount, which is why position sizing matters more than an optimistic growth target.
Build a risk plan, not a promise
Use conservative scenarios, include losing periods in your own planning, and compare modeled growth with maximum tolerable drawdown. Journal actual results rather than adjusting assumptions to fit a target.