A strange property of compound interest is that the early years look almost useless. Invest $10,000 at 10% annually Year 1 $11,000 Year 5 about $16,105 Year 10 about $25,937 Year 20 about $67,275 Nothing dramatic happens at first. Then the growth starts producing growth of its own. That changes the way the same percentage behaves over time. The important idea isn’t “compounding is powerful.” Everyone knows that. It is that the output eventually becomes part of the input. Markets contain many versions of this mechanism. Capital generates returns. Returns become capital. Larger capital changes position sizes. Position sizes can change liquidity needs and constraints. A system can therefore evolve because of what it produced yesterday. That is a very different kind of growth from simply adding the same amount every period. Linear systems add. Compounding systems feed their past into their future. #Trading# #Finance# #QuantTrading# #SystemsThinking#