# Daily Compound Interest

- Compound Interest
- Daily Compounding
- SIP Calculator
- Forex Compounding

See how much daily interest/earnings you might receive on your investment over a fixed number of days, months and years. You may find this useful if doing day trading or trading bitcoin or other cryptocurrencies.

**Disclaimer:** Whilst every effort has been made in building our calculator tools, we are not to be held
liable for any damages or monetary losses arising out of or in connection with their use. Full disclaimer.

**On this page:**

## What is daily compound interest?

With compound interest, the interest you have earned over a period of time is calculated and then credited back to your starting account balance. In the next compound period, interest is calculated on the total of the principal plus the previously-accumulated interest.

The more frequently that interest is calculated and credited, the quicker your account grows. The interest earned from daily compounding will therefore be higher than monthly, quarterly or yearly compounding because of the extra frequency of compounds.

With some types of investments, you might find that your interest is **compounded daily**, meaning that you're earning interest on both the principal
amount and previously accrued interest on a daily basis. This is often the case with trading where margin is used (you are borrowing money to trade).

Examples of these include CFD trading, Forex trading, spread-betting or options for assets like stocks and shares, as well as commodities like oil and gold and cryptocurrencies like bitcoin and Ethereum. This is a very high-risk way of investing as you can also end up paying compound interest from your account depending on the direction of the trade.

## How to calculate daily compound interest

Daily compound interest is calculated using a simplified version of the formula for compound interest. To begin your calculation, take your daily interest rate and add 1 to it. Next, raise that figure to the power of the number of days it will be compounded for. Finally, multiply that figure by your starting balance. Subtract the starting balance from your total if you want just the interest figure.

Note that if you wish to calculate future projections without compound interest, we have a calculator for simple interest without compounding.

Let's examine the formula in a bit more detail.

## Formula for daily compound interest

The formula for calculating daily compound interest with a **fixed daily interest rate** is:

Where:

**A**= the future value of the investment**P**= the principal investment amount**r**= the daily interest rate (decimal)**t**= the number of days the money is invested for- ^ = ... to the power of ...

### Example investment

Let's use the example of $1,000 at 0.4% daily for 365 days.

**P**= 1000**r**= 0.4/100 = 0.004**t**= 365

**Let's put these into our formula:**

A = P(1+r)^t

A = 1000(1+0.004)^365

A = 1000 * 4.2934377972993

A = 4293.4377972993

To get the total interest, we deduct the principal amount (1000) from the future value. This gives us interest of $3293.44

### Daily compounding with annual interest rate

If you have an **annual interest rate** and want to calculate daily compound interest, the formula you need is:

Where:

**A**= the future value of the investment**P**= the principal investment amount**r**= the annual interest rate (decimal)**t**= the number of years the money is invested for- ^ = ... to the power of ...

### Including additional deposits

Making regular, additional deposits to your account has the potential to grow your balance much faster thanks to the power of compounding. Our
**daily compounding calculator** allows you to include either daily or monthly deposits to your calculation. Note that if you include
additional deposits in your calculation, they will be added at the end of each period, not the beginning.

## Questions about our calculator

Here are some frequently asked questions about our daily compounding calculator.

### What is the daily reinvest rate?

The daily reinvest rate is the percentage figure that you wish to keep in the investment for future days of compounding. As an example, you may wish to only reinvest 80% of the daily interest you're receiving back into the investment and withdraw the other 20% in cash.

Let's look at an example. If your initial investment is $5,000 with a 0.5% daily interest rate, your interest after the first day will be $25. If you choose an 80% daily reinvestment rate, $20 will be added to your investment balance, giving you a total of $5020 at the end of day one. The remaining $5 will be withdrawn as cash.

### Deducting weekends from time

The option to deduct weekends from the years, months, and days figure you've entered, allows you two options for compounding when excluding weekends. Let's look at each option with an example of a one-year calculation.

- You want to compound for
**one year**minus weekends (one year, net of weekends). This means your figure will compound for around**261 BUSINESS days**, with an end date 365 days from your start date, depending on when the weekends fall. - You want to compound for
**one year**, with weekends excluded from the time (one year on a gross basis). This means your figure will compound for**365 BUSINESS days**, with an end date around 511 days from your start date, depending on when the weekends fall.

The aim of these options is to give you maximum flexibility around how your interest is compounded and calculated, whether you're Forex trading, trading with cryptocurrencies or simply buying and selling stocks and shares.

Calculator by Alastair Hazell. Reviewed by Chris Hindle. Last updated: September 24, 2022