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Trading Math
What Is Compounding
Compounding is a sizing rule: the next trade is sized from the balance the account holds now, not the balance it started with. This paper shows you the rule beside fixed sizing, ten real days sized by it, how it shrinks losses as well as growing gains, and where the one division is done on your platform.
Compounding is not something the market does; it is a rule for choosing the size of the next trade. A fixed trader takes the same size every day — one lot, 100,000 euros, sized from the 5,000 the account started with. A compounding trader sizes from the balance the account holds this morning: one lot for every 5,000 in it, so a balance of 4,124 gives 0.82 lots and a pip, the fourth decimal place, is worth $8.20 that day instead of $10. The rule is the same every morning; the balance it is applied to is not.
Ten real days, sized by the rule
Here is the ten-day list — the euro against the dollar bought at each day's open and sold at its close, 24 August to 4 September 2026 — sized by the rule. The pips are the same real pips; only the lots change, morning by morning, to the balance divided by 5,000. After the 28 August loss the balance was 4,124 and the size 0.82, so the 36.3 pips of 31 August made $297.66 instead of $363. After that gain the size rose to 0.88. The list ended at 4,410.70, against 4,471 sized fixed, because the losing days came first and shrank the size before the winning ones.
