Hi,

From backtesting various strategies on TradingView I've noticed a common pattern when trying to work out whether it's better use a set contract amount (eg 0.1btc for every trade) or compounding (using 100% of the available USDT balance).

I've noticed that the set number of contracts approach gains pretty consistently right from the start but doesn't yield so much %, whereas compounding doesn't see significant gain for a long time but then suddenly starts exponentially yielding %.

I've noticed this as a common pattern across various different strategies and pairs.

Heres an illustration: https://imgur.com/a/LXtHlPA

Can someone please explain the basic theory/maths of why it happens?

Also does this generally mean it's better to compound than not in the long run?

Thanks