How much leverage would it take to beat buy & hold?
An indicator can make money and still lose to simply holding the asset. The honest way to say by how much is leverage: this setup needs 2.4× to match buy-and-hold. But leverage magnifies the drawdown too — so we publish the leverage each setup needs beside the leverage its own worst drawdown survives. When the first is bigger than the second, no amount of leverage saves it.
Take Bollinger Breakout on Brent crude. Out of sample it returns 2.9%/yr against buy-and-hold's 17.7% — so it needs 6.1× leverage to draw level. Its worst drawdown is 43%, which means an account is wiped at 2.33×. The leverage it needs is nearly triple the leverage it survives. It doesn't underperform buy-and-hold; it cannot reach it, at any leverage, ever.
That is the common case, not the exception. Across the grid the median setup needs 1.84× and survives 2.4× — a margin thin enough that a single bad run closes it.
And leverage has a rent. Holding it costs funding — roughly 10%/yr on the borrowed part. Charge that and the share of setups that beat buy-and-hold at all falls from 31% to 16%. Borrowing cost alone erases about half of what looks like an edge.
| Indicator | Beats B&H ↕ | No leverage needed | Leverage needed ↕ | Leverage survived | Liquidates first ↕ |
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Out-of-sample window, minimum 10 trades, indicators with at least 50 qualifying backtests. Returns are net of 0.08% per side costs; fees scale with position size, so leverage doesn't change that. Volatility drag is not modelled, which makes every “can beat B&H” here optimistic and every “liquidates first” conservative. Hypothetical backtests — see the disclaimer.