Prophet Intelligence

Outperforming a buy-and-hold benchmark looks good on paper, but it’s a shallow way to evaluate a trading strategy.

It ignores what actually matters: how that return was achieved.

A strategy can beat buy and hold while taking on excessive risk, suffering deep drawdowns, or staying heavily exposed to the market for long periods. That’s not skill—that’s just leveraged luck in disguise. This becomes especially dangerous in swing or position trading, where prolonged exposure can amplify downside risk.

Focusing only on net profit versus buy and hold blinds you to critical factors like:
- Risk-adjusted returns
- Maximum drawdown
- Volatility of returns
- Capital efficiency and exposure time

Even worse, during strategy development, this mindset can cause you to discard high-quality systems—strategies that manage risk well and deliver consistent returns—simply because they don’t outperform a passive benchmark in raw profit.

That’s a mistake.

A robust strategy isn’t defined by how much it makes in a vacuum, but by how efficiently and reliably it generates returns relative to the risk it takes.

Beating buy and hold is nice.
Understanding how you beat it—or why you don’t—is what actually matters.

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