Michael L342 O’Neil#74

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What is compounding growth in forex and why is it powerful?

Compounding is the reinvestment of profits to generate exponential growth. In forex, compounding occurs when traders risk a percentage of account equity per trade (e.g., 2%), so as equity grows, trade size grows. Example: $10,000 at 2% risk grows to $12,000 after gains, so next trade risks $240 instead of $200. Over time, small edges become massive growth. The magic of compounding relies on consistency—steady 3–5% monthly returns scale dramatically over years. Risks: large drawdowns break compounding momentum, and overleveraging accelerates ruin. Institutions harness compounding in fund management through reinvestment policies. Retail traders must combine compounding with strict risk rules to survive long enough to benefit. Patience is key: compounding rewards discipline, not shortcuts.