Trade Signal Based Upon SMA of P/E Ratio

Author: rmpwealth

Creation Date: 3/20/2017 4:48 PM

Wealth Lab » WealthScript (.NET) » Trade Signal Based Upon SMA of P/E Ratio

rmpwealth

3/20/2017 4:48 PM

I would like to explore and back-test trading strategies based upon analyses of a Symbol's P/E ratio instead of its Price.

For example: Buy SPY when the P/E Ratio of SPY crosses above the 30-Day SMA of the the SPY P/E Ratio; Sell SPY when the P/E Ratio of SPY crosses below the 30-Day SMA of SPY's P/E Ratio.

I have not been able to create Rules (or Code) that apply Indicators to P/E Ratios. Can someone please help?

Thank you.

Eugene

3/20/2017 5:38 PM

P/E Ratio is earnings per share divided by price (e.g. close), optionally multiplied by adjustment factor.

You're right on that currently it won't be possible to apply indicators to P/E Ratio. However, several examples exist on the forum (#1, #2) that are helpful enough to start with strategy code. For instance, here's one. Make sure that the Fidelity fundamental data is up to date before running this code:

CODE:
Please log in to see this code.

Size:

Color:

P/E Ratio is earnings per share divided by price (e.g. close), optionally multiplied by adjustment factor.

You're right on that currently it won't be possible to apply indicators to P/E Ratio. However, several examples exist on the forum ([link=https://www.wealth-lab.com/Forum/Posts/Coding-strategy-based-on-P-E-for-SPX-37746]#1[/link], [link=https://www.wealth-lab.com/Forum/Posts/Plot-Fundamental-series-P-E-28322]#2[/link]) that are helpful enough to start with strategy code. For instance, here's one. Make sure that the Fidelity fundamental data is up to date before running this code:

[code]using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;

namespace WealthLab.Strategies
{
	public class MyStrategy : WealthScript
	{
		protected override void Execute()
		{
			var pePane = CreatePane(30, true, false);
			var eps = FundamentalDataSeries("earnings per share");
			var pe = Close / eps;
			pe.Description = "P/E Ratio (" + Bars.Symbol + ")";
			pe *= FundamentalDataSeries( "adjustment factor" );
			var peSMA = SMA.Series(pe, 30);
			PlotFundamentalItems(pePane, "earnings per share", Color.Green, WealthLab.LineStyle.Invisible, 1);               
			PlotSeries(pePane, peSMA, Color.Blue, LineStyle.Solid, 1);
			
			for(int bar = GetTradingLoopStartBar(30); bar < Bars.Count; bar++)
			{
				if (IsLastPositionActive)
				{
					//Sell SPY when the P/E Ratio of SPY crosses below the 30-Day SMA of SPY's P/E Ratio.					
					if( CrossUnder( bar, pe, peSMA ) )
						SellAtMarket( bar+1, LastPosition );
				}
				else
				{
					//Buy SPY when the P/E Ratio of SPY crosses above the 30-Day SMA of the the SPY P/E Ratio; 
					if( CrossOver( bar, pe, peSMA ) )
						BuyAtMarket( bar+1 );
				}
			}
		}
	}
}[/code]