Trading & signals glossary
What is compounding in trading?
Compounding is earning on what you’ve already earned: when each trade risks a percentage of your current balance, gains make your next trades bigger and losses make them smaller. Over time it multiplies a small edge, and a small negative edge just the same.
How it works
If you risk 1% of the account and the account grows, that 1% is more money each time; if it shrinks, less.
The effect depends on two things: what you make on average per trade (expectancy, in R) and how many trades you take.
It works both ways: a slightly negative expectancy, repeated hundreds of times, slowly eats away at the account.
How to calculate it
ending balance = starting balance × (1 + risk × average R)^n
Risk as a decimal (1% = 0.01); n is the number of trades.
Example: +0.10 R per trade, 500 times
- A $10,000 account risks 1% per trade and makes +0.10 R on average.
- Each trade adds about 0.1% on average to the current balance.
- After 500 trades: $10,000 × 1.001^500 ≈ $16,483, a gain of +65%.
Our data · Verpips
The channels’ median R, compounded
- −0.04 R
- channels’ median R per trade
- 80
- what’s left of 100 after 500 trades at 1%
- 165
- at +0.10 R per trade, after 500
A 100 account, risking 1% per trade
Median channel R (−0.04 R)
A channel at +0.10 R
The median channel we measure makes −0.04 R per trade. That looks like almost nothing, but compounded over 500 trades at 1% risk, it takes an account of 100 to 80. A channel at +0.10 R per trade would take it to 165.
Verpips data as of Oct 7, 2026, measured against the real price. See how we measure and the channel directory.
Types and variations
- Risk on current balance
- Compounds: position size grows and shrinks with the account.
- Fixed dollar risk
- Doesn’t compound: you risk the same amount every time, whether the account grows or not.
Why it matters when choosing a signal channel
A difference of a few tenths of an R per trade looks irrelevant on one signal and changes everything over a year. That’s why we measure each channel’s R per trade, not just its win rate.
Common traps
- Projecting the channel’s best month out over a full year.
- Forgetting that it compounds on the way down too.
- Ignoring costs: a spread worth tenths of an R per trade compounds too.
Key takeaways
- ✓Earn on what you’ve earned, and lose on what’s left.
- ✓Depends on average R and the number of trades.
- ✓A small, consistent edge is what compounds.
- ✓So does a small negative edge.
FAQ: compounding
How does compounding work in trading?
By risking a percentage of your current balance on each trade: gains make your position size grow and losses shrink it.
How much can you make with compounding?
It depends on your average R per trade and how many trades you take. At +0.10 R and 1% risk, 500 trades multiply the account by a little over 1.6.
Can compounding make you lose money?
Yes: with a negative average R, it compounds on the way down and the account shrinks little by little.
Channel by channel
See these numbers for each channel, not as an average.
With a free account you see each channel’s result in R, its drawdown, and what it announced versus what actually happened.