Seeking advice on fundamental crossover strategy implementation

[elex]

Hi everyone,

I'm working on a trading strategy similar to moving average crossovers but using fundamental indicators. It generates a numerical indicator to reflect the fundamental value of a stock. I calculate "fundamental averages" for long-term (100 periods) and short-term (50 periods) metrics like EPS, P/E ratio, revenue growth, free cash flow, debt-to-equity ratio, and dividends. The idea is to buy when the short-term average crosses above the long-term average and sell when it crosses below.

I normalize these parameters to make them comparable and assign weights to each one, but I'm confused about the best way to implement this. Any advice or insights would be greatly appreciated! Thanks!

 

[TWI]

I would suggest backtesting your idea with historical data and experiment with various entry and risk management criteria. Just start simply buying on the cross up and going flat on the cross down. Then, if getting whipped around a bit add some additional cirteria like buy the cross up and a new high close on week or x day high close. Lots of possibilities in this part. Once you are happy with that then work on the exits. Personally if I enter on a signal like a crossover and price action I rarely use the same thing to exit. I tend to just use money management and support/resistance which either stops me out fairly rapidly or trails as the poisition comes into increasing profitability.