Forex compounding means reinvesting trading profits so that future position sizes or returns are calculated from a larger account balance. It can accelerate both gains and losses because risk compounds as the account changes. A compounding plan should define a risk percentage, withdrawal rules, and realistic return assumptions rather than treating projected growth as guaranteed.
For example, if an account grows from $1,000 to $1,100 and the trader keeps the same risk percentage, the next trade is based on the larger balance. That creates a compounding effect. The same mechanism works in reverse during losses. A calculator can illustrate scenarios, but projections are mathematical examples rather than forecasts of actual trading performance.
Risk note: Do not use a compounding projection as a promise of future returns.