Compounding Gains
Compounding Mechanics: What Periodic Return Does It Take to Double an Account? Breaking down monthly vs. semi-monthly compounding math for trading system growth targets. When engineering trading models, understanding compounding velocity is critical for setting target return thresholds. Doubling account equity ( +100% total gain ) doesn't require a single massive trade—it requires hitting consistent periodic yield targets that compound on rollover capital. Core Compounding Formula: (1 + r)^n = 2.0 Where r is the required periodic yield and n is the number of execution cycles. 1. Monthly Cadence (12 Compounding Cycles) If capital rolls over on a monthly execution loop (12 periods), the required return per cycle to achieve a 100% account expansion is: Required Yield per Period: 5.9463% Calculation: r = (2.0)^(1/12) - 1 ≈ 5.95% Cycle Period Return Account Balance ($10...