Don't Be Fooled by a "+5,000%" Backtest

"+6,408% over 10 years." "100× your account." You have seen jaw-dropping numbers on EA sales pages. The instinct is: if it grows that much, it must be a great EA. But these enormous net-profit percentages are almost always built not by the EA's skill, but by the multiplication of compounding.

The same EA can show dozens of times the net profit from compounding alone

Here is the decisive fact up front: with exactly the same win rate and the same profit factor, net profit % can be 10× or 50× larger from the compounding setting alone.

Compounding means growing your lot size in proportion to a rising balance. Win a little early, and the next bet is placed with a bigger lot. Win again, and bigger still. As long as it works, net profit % balloons exponentially.

So "+6,408%" does not mean the EA is excellent. It means "compounding was turned up high." Run the same EA on a fixed lot and the net profit over the same period might be +150%. The skill hasn't changed at all — yet the displayed number differs by more than 40×.

Compounding accelerates destruction, not just growth

The real problem with compounding is that it doesn't only work on the way up. It works with the same force on the way down.

What happens when a big drawdown hits after the balance has grown and the lots have gotten large? You lose with a big lot, so the loss amount balloons too. Compounding multiplies profit exponentially — and accelerates the decline just as much when the market turns.

So behind a heavily compounded "+6,408%" there is usually a huge maximum drawdown hidden. Look at the actual report for the same EA and a DD of 89% is not unusual — meaning a moment where nearly 90% of the account was temporarily gone. Read only the net profit % and skip the DD, and that danger is invisible.

So read these, not the net profit %

To measure an EA's skill, the compounding-inflated net profit % is a poor metric. Read these instead:

Profit factor does not change whether you compound or not. So when you want to compare different EAs fairly, compare by PF, not by net profit %.

Why we don't sell "compounding magic"

"At X% a year for 10 years, this is how much you make" — the compounding multiplication — is not a promise. Markets are not constant, and if a drawdown comes along the way, compounding works against you. We don't lead with flashy annual returns or net-profit percentages because we know that a compounded number is a product of the setting, not of skill.

On our product pages we always show the profit factor and equity drawdown alongside any net profit %, and we state the definition of "compounding" and the blow-up risk on aggressive EAs.

Check it yourself

Run a backtest with the free EA and toggle UseCompounding between true and false, then watch how much the net profit % changes. The profit factor should stay the same while only the net profit % moves a lot — a direct demonstration that net profit % is not a measure of skill.

Donchian Trend Engine (free EA)

The compounding-independent PF and equity-DD real data for every product is on the verification page.

Summary

• Huge net-profit percentages (+5,000% and the like) are built by compounding, not skill.
• The same EA can show dozens of times the net profit % from the compounding setting alone.
• Compounding accelerates the drawdown, not just the profit.
• To measure skill, read PF, equity DD, win rate and trade count.
• Distrust an EA that emphasizes net profit % but omits the DD.

Related: What is a realistic monthly target for an EA? · Equity drawdown vs balance drawdown · Why a 90% win rate is a warning sign