Most researches focused on the analytical stabilized algorithm for the modular simulation of single domain, e.g., pure mechanical systems. Only little work has been performed on the problem of multi-domain simulation stability influenced by algebraic loops. In this paper, the algebraic loop problem is studied by a composite simulation method to reveal the internal relationship between simulation stability and system topologies and simulation unit models. A stability criterion of multi-domain composite simulation is established, and two algebraic loop compensation algorithms are proposed using numerical iteration and approximate function in multi-domain simulation. The numerical stabilized algorithm is the Newton method for the solution of the set of nonlinear equations, and it is used here in simulation of the system composed of mechanical system and hydraulic system. The approximate stabilized algorithm is the construction of response surface for inputs and outputs of unknown unit model, and it is utilized here in simulation of the system composed of forging system, mechanical and hydraulic system. The effectiveness of the algorithms is verified by a case study of multi-domain simulation for forging system composed of thermoplastic deformation of workpieces, mechanical system and hydraulic system of a manipulator. The system dynamics simulation results show that curves of motion and force are continuous and convergent. This paper presents two algorithms, which are applied to virtual reality simulation of forging process in a simulation platform for a manipulator, and play a key role in simulation efficiency and stability.