Comparing Trading Strategy Returns with Buy and Hold

Summary

This document presents a visual framework for comparing a trading strategy’s equity with a buy-and-hold benchmark over a selected date range. It plots strategy profit, benchmark return, and their difference, then summarizes the share of bars when the strategy is ahead or behind and the average difference. A moving-average crossover is included as a placeholder example, rather than as evidence that the comparison method improves trading results.

The comparison depends on the platform’s built-in buy-and-hold measure and on the accuracy of its own bar-by-bar statistics. The document reports no performance results or validation, and notes that benchmark definitions can affect the comparison. It recommends adding other benchmarks and statistics, such as drawdown duration, and improving chart displays to make specific periods easier to assess.

Key ideas

• The framework plots strategy profit, buy-and-hold return, and the difference between them.
• It counts the bars when strategy profit is above or below the benchmark and calculates an average difference.
• A selectable date range lets users focus the comparison on a chosen period.
• The comparison relies on the trading platform’s benchmark measure and may inherit errors from it.
• The moving-average crossover is a placeholder and does not establish strategy performance.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.