What is a compounded return and why is it important to know about it?

“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it” — Albert Einstein

Although the article will not be about the interest rate quoted by Einstein, this concept is close to the compounded returns that the B-cube.ai website also operates with.

In this article, we review an example of compounded returns and show how to interpret the percentages in the Historical Performance graph.

On the b-cube.ai website, we use compounded returns to show the performance graphs and returns of all of our bots. This should not be confused with the Bar graph, which shows results from month to month.

The amount used for each trade is always the allocation percentage specified for that bot. Therefore, the position size is not static as it also includes the change in the account.

That is the starting point. The amount used for trading is always a specified percentage of the current balance (allocation). Why this is different from a static system, and how it is better suited to earn more money and achieve better results in the long run, let’s look at an example below.

Example 1:

Let’s imagine you have a portfolio with 10 000 USDT and all of your trades gave you +5% returns. Your balance would look like this:

After the 1st trade: 10 500

(We won 5% on the equity)

After the 2nd trade: 11 025

(We won 5% again but we took the 5% of 10 500 and not 10 000)

After the 3rd trade: 11 576

A static system would think like this: For each trade, we won 5% of the initial 10 000 USDT portfolio, meaning each trade was worth 500 USDT.

However, a compounded return system is not exactly giving 500 USDT after each trade. As you can see in this case, the compounding effect is giving us bigger returns than 5% of the initial capital would have given (which is 500 every time).

The compounding effect is the same if we are losing.

In the case of -5% the previous example would look like this:

Example 2:

1st: 9 500

2nd: 9 025

3rd: 8 573

Compounded returns tend to give higher returns in the long run than simple returns. Just like in the case of compounded interest vs simple interest:

The returns of the b-cube.ai next-gen bots are compounded. That is the reason why you can see such amazing numbers like the XRP Intraday Scalp Trader Futures Bot (at the time of writing) overall performance: +1134.7%.

The average monthly return is +97.54%. But here note that this doesn’t mean your account will see +97.54% every month. This is an average calculation of the compounded returns we see in overall performance. In other words, if you would have started at the same time as the bot until now this is the overall performance you would have seen and that is the average of this time.

Also, if you have just started now, your account needs time to get the advantage of the compound effect. Remember, after the first trade, our profit was 500. This is a 5% gain on your initial equity. After the 3rd trade, we got 11 576 which was still the result of a 5% trade, however, 1 576 is not a 15% gain (3x5%) but 15,75% instead.

We hope this article helps you better understand our metrics on the website.

Follow us on Medium, we will keep publishing articles like this to help you gain more information about b-cube.ai and to understand trading in general.

Thank you for reading!


Trading cryptocurrencies involves risk. The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the article’s content as such. Author, website or the company associated with them does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.




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