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What is Compounding?

Basics

복리

A structure in which earned results are added back to the principal and become the base for the next calculation. The longer the period, the more sharply the difference widens. Losses work the same way in reverse: after a large drop, the remaining capital is smaller and the return needed to recover rises steeply. For that reason, in compounding, drawdown management comes before the pursuit of profit.

CompoundingCompoundSimplerolling gains back in widens the gap over time

Lessons using this term (with diagrams)

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Compounding meaning — Trading glossary | MarketSurfer