How it works
Without cash flows and with a constant periodic rate r, a starting amount P becomes P × (1 + r)^n after n periods. With changing returns, multiply the individual factors instead. The rate and period must match: an effective annual rate cannot simply be inserted as a monthly rate.
Each deposit has its own time in the account. A contribution made at the beginning of a period participates in that period's result; one made at the end does not. For variable returns, calculate the balance sequentially and record whether deposits occur before or after each return. Withdrawals reverse the direction of the cash flow.
Worked example
Assume 1,000 units initially, a hypothetical 1% return in each of two months, and 100 units added at each month-end. Month one ends at 1,000 × 1.01 + 100 = 1,110. Month two ends at 1,110 × 1.01 + 100 = 1,221.10. Total contributed capital is 1,200, so growth is 21.10. Moving both deposits to the start of each month gives 1,223.11 instead.
Interpretation and limits
The example assumes no fees, taxes, losses or withdrawals. Market returns are uneven and may be negative; reinvestment does not guarantee a positive outcome. A larger balance after deposits does not establish a higher percentage return. Comparing strategies requires a consistent method for treating external cash flows, not merely comparing ending balances.
Chart practice
On available closed monthly bars, record two successive price changes and multiply their growth factors. Keep hypothetical deposits in a separate worksheet and identify any missing distributions. Student Wyckoff Pro supplies chart analysis; a price series alone cannot reconstruct a personal account's cash flows or certify its compounded return.
Primary sources
Sources explain the mechanics and limitations; the editorial examples use invented numbers rather than market quotations.
Your next practical step
Continue with analysis of available closed daily, weekly and monthly bars.
Open the first-chart instructions ↗