Compounding is based on interest (and is derived from interest), you can't technically compound in trading, as the amount you are 'compounding' is put back as risk to cover drawdown and new positions. If you mean compounding in terms of increased position sizing, you are compounding your risk, not your capital. I doubt Warren Buffet compounds his profits (I think he will chuckle if he hears that), he would use his profits to obtain investments elsewhere, called risk capital, based on a percentage of portfolio. (so he could double his risk capital - bonus! or lose it all - in which case only losing a small percentage on his entire basket of portfolios.)
For every loss there should be at least an equal and opposite profit.