Does buy-and-hold beat day trading? What the data says

By Andre

Educational only, not financial advice. Simulations and backtests are models, not promises. Check every rule with your own firm.

Short answer: for most people, yes, by a wide margin. And there’s a structural reason beyond "most traders are bad": a large share of the stock market’s return has historically come while day traders are flat.

The equity premium is real, and slow

US stocks have historically earned about 6% a year more than safe assets (Mehra and Prescott 1985). Buy-and-hold collects that premium simply by being invested. It’s a reward for bearing risk, not a prediction.

Where the return is earned: overnight

Several studies split daily returns into the overnight part (close to next open) and the intraday part (open to close):

Cliff, Cooper and Gulen (working paper) find that over the decade they studied, the US equity premium came entirely from overnight returns, with intraday returns near zero or negative, for stocks, indices and index futures.
Kelly and Clark (2011) also document large differences between returns in trading hours and overnight.
Hendershott, Livdan and Rösch (2020) show that market beta is rewarded overnight and not during the day.
Lou, Polk and Skouras (2019) find momentum profits are earned overnight, while some other anomalies earn their premia intraday.
Bogousslavsky (2021) documents how the cross-section of returns differs between the trading day and overnight.

The implication for a "flat by the close" strategy is blunt: it gives up most of the premium buy-and-hold collects, and then pays spreads on top.

What happens to actual day traders

In Taiwan, 1992–2006, fewer than 1% of roughly 450,000 day traders a year were predictably profitable after fees (Barber et al. 2014). The best 500 did earn real returns, so skill exists, but it’s rare.
In Brazilian index futures, 97% of those who day traded for more than 300 days lost money, and only about 1% earned more than the minimum wage (Chague et al., working paper).

What our own tests found

Across a long series of backtests on large US stocks, ETFs, index CFDs and gold (our own work, not peer-reviewed), buy-and-hold beat every day-only strategy:

Over about 3 years of hourly data, an equal-weight basket of 25 large stocks returned +77% and 19 ETFs +42%, while every previous-day breakout version lost 5–35% after costs.
Over 2 years, US500 returned +69%, NAS100 +84% and gold +77%, ahead of every opening-range breakout and narrow-range variant we tested on those markets.
Over 2005–2026, a long-only daily dip-buying system on stocks made a small positive return per trade but trailed QQQ and an equal-weight basket by a wide margin.

One honest caveat: our stock baskets held names that survived to today, which flatters buy-and-hold. Index ETFs like QQQ don’t have that problem.

Is there any day-only edge?

The best-documented one is intraday momentum into the close: the return from the prior close to late afternoon predicts the last half-hour, in SPY (Gao et al. 2018) and in 60+ futures markets since 1974 (Baltussen et al. 2021), driven by option dealers’ hedging and leveraged-ETF rebalancing. The edge is a few basis points a trade, so costs decide whether a retail CFD trader can capture it, and it may have weakened since publication.

So why do prop challenges exist?

A challenge isn’t a long-term investment. It’s a short, capped bet: you risk a fee for a chance at a funded account. You can’t buy-and-hold your way through a 10% target in a few weeks without taking market-sized drawdowns that the rules don’t allow. That’s fine as long as you see it clearly: treat the fee as the cost of a lottery-like option unless you have a measured edge, and keep your long-term savings in boring, diversified, buy-and-hold investments.

Sources

Mehra, R. & Prescott, E. C. (1985). The equity premium: A puzzle. Journal of Monetary Economics 15(2), 145–161. doi:10.1016/0304-3932(85)90061-3 [Peer-reviewed]
Cliff, M., Cooper, M. & Gulen, H. (2008). Return differences between trading and non-trading hours: Like night and day. SSRN. doi:10.2139/ssrn.1004081 [Working paper, not peer-reviewed]
Kelly, M. A. & Clark, S. P. (2011). Returns in trading versus non-trading hours: The difference is day and night. Journal of Asset Management 12, 132–145. doi:10.1057/jam.2011.2 [Peer-reviewed]
Hendershott, T., Livdan, D. & Rösch, D. (2020). Asset pricing: A tale of night and day. Journal of Financial Economics 138(3), 635–662. doi:10.1016/j.jfineco.2020.06.006 [Peer-reviewed]
Lou, D., Polk, C. & Skouras, S. (2019). A tug of war: Overnight versus intraday expected returns. Journal of Financial Economics 134(1), 192–213. doi:10.1016/j.jfineco.2019.03.011 [Peer-reviewed]
Bogousslavsky, V. (2021). The cross-section of intraday and overnight returns. Journal of Financial Economics 141(1), 172–194. doi:10.1016/j.jfineco.2020.07.020 [Peer-reviewed]
Barber, B. M., Lee, Y.-T., Liu, Y.-J. & Odean, T. (2014). The cross-section of speculator skill: Evidence from day trading. Journal of Financial Markets 18, 1–24. doi:10.1016/j.finmar.2013.05.006 [Peer-reviewed]
Chague, F., De-Losso, R. & Giovannetti, B. (2019). Day trading for a living? SSRN. doi:10.2139/ssrn.3423101 [Working paper, not peer-reviewed]
Gao, L., Han, Y., Li, S. Z. & Zhou, G. (2018). Market intraday momentum. Journal of Financial Economics 129(2), 394–414. doi:10.1016/j.jfineco.2018.05.009 [Peer-reviewed]
Baltussen, G., Da, Z., Lammers, S. & Martens, M. (2021). Hedging demand and market intraday momentum. Journal of Financial Economics 142(1), 377–403. doi:10.1016/j.jfineco.2021.04.029 [Peer-reviewed]

"Peer-reviewed" means published in a refereed journal. Working papers and books aren’t peer-reviewed. Figures from "our own tests" are our backtests and simulations, not peer-reviewed research.