> ## Documentation Index
> Fetch the complete documentation index at: https://docs.backquant.com/llms.txt
> Use this file to discover all available pages before exploring further.
# Long-Term Trend & Valuation Model
> A two-layer framework that separates 'where we are in the cycle' from 'what to do about it' - built for long-horizon decisions on assets with strong boom-bust structures.
Open the Long-Term Trend & Valuation Model on TradingView. Invite-only.
## Overview
This invite-only tool is a **two-layer framework** designed to simplify
long-horizon decision-making:
* **Valuation Engine** - measures how extended price is relative to its own
regime. Outputs a single oscillator centered on zero, bounded by
configurable overbought / oversold thresholds.
* **Trend Model** - aggregates several independent long-term subsystems
into a composite **strength score**, mapped to a long / cash / short
stance.
The separation of "where we are in the cycle" from "what to do about it"
makes this model particularly suited to assets with strong boom-bust
structures (like crypto). Each layer answers one question, and they're
designed to be read **together**, not as standalone signals.
## Valuation Engine
The valuation oscillator is a **weighted blend of six standardized
components**. Each component measures a different facet of "extension"
relative to the asset's own historical regime, then gets normalized so
that all signals sit on the same scale before they're combined.
### How it is built
| Stage | What happens |
| --------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| **Standardization** | Each component is converted to a z-score over a configurable lookback (default `1100` bars), so different scales become comparable. |
| **Weighted blend** | Components are combined with user-controllable weights so you can emphasize the lenses you trust most. |
| **Optional smoothing** | A moving average (`SMA`, `EMA`, `RMA`, `HULL`, `WMA`, `DEMA`, `TEMA`, `LINREG`, `ALMA`, `T3`) can be applied to filter whipsaws. Default is `RMA` over `45` bars. |
| **Bounded scaling** | A `tanh`-based compression keeps the oscillator readable across cycles - extreme outliers don't break the chart. |
| **Volatility-aware re-expansion** | After compression, the signal is re-expanded by rolling standard deviation, so "overbought / oversold" stays meaningful when volatility regimes change. |
| **Threshold logic** | Thresholds can be **fixed** (default ±1.5) or **dynamic** (k·σ bands around the rolling mean or around zero). |
### Reading the oscillator
| State | Meaning |
| ---------------------- | ---------------------------------------------------------- |
| **Above 0** | Supportive regime - backdrop favors continuation. |
| **Below 0** | Deterioration / risk aversion regime. |
| **Tagging upper band** | Optimistic stretch - late-cycle risk, take-profit context. |
| **Tagging lower band** | Pessimistic stretch - washouts, early-base context. |
### Configurable inputs
| Input | Default | What it changes |
| ---------------------------- | ------------- | ------------------------------------------------------------------------------------ |
| **Calculation Source** | `close` | Price source used everywhere downstream. |
| **Z-Score Lookback** | `1100` | The master regime lookback. Longer = smoother / longer-term framing. |
| **Per-component lookbacks** | various | Each component has its own length - defaults are tuned for daily/weekly horizons. |
| **Per-component weights** | `1.0`–`1.5` | Relative importance of each component in the final score. Set any to `0` to disable. |
| **Smooth Valuation** | on | Apply a moving-average filter to the final composite. |
| **MA Type / Period / Sigma** | RMA / 45 / 2 | Smoothing kernel and length (Sigma only used by ALMA). |
| **Normalization Length** | `90` | Window used by the volatility-aware compression. |
| **Re-expand Cap** | `2.0` σ units | Maximum width of the post-compression swing. |
| **Alpha mode** | `Manual` | Compression strength - set manually, or auto-mapped so 1σ→0.76, 2σ→0.95, or 3σ→0.99. |
| **Scale by Volatility** | on | Toggles the compression / re-expansion stage. |
### Threshold modes
* **Fixed thresholds** - default ±`1.5`, configurable.
* **Dynamic (`k · σ`)** - thresholds become `mean ± k · σ` over a rolling
window (default `100` bars, `k = 1.5`). Optionally **center at zero**
to use `±k · σ` regardless of mean drift.
### Built-in summary table
A right-corner summary table prints each component's current z-score plus
a 🟢 / 🔴 status emoji, the **Final Score**, and the overall valuation
emoji. Toggle on/off via *Show Summary Table*. The table works in light
or dark mode (controlled by the *Light or Dark Mode* input).
## Trend Model
The trend layer combines **seven independent long-term subsystems**.
Each subsystem produces its own long / short / neutral vote on the
prevailing regime, and the votes are averaged into a single composite
score in the range `[-1, +1]`.
The subsystems are deliberately diverse - each looks at trend from a
different mathematical lens (price-anchor alignment, persistence checks,
macro regime confirmation, higher-timeframe overlays, etc.). You can
toggle any subsystem on or off independently.
### Subsystem toggles
| Toggle | Default |
| ------------------- | ------- |
| Use Component One | on |
| Use Component Two | on |
| Use Component Three | on |
| Use Component Four | on |
| Use Component Five | on |
| Use Component Six | on |
| Use Component Seven | on |
Disabling a subsystem reweights the composite among the remaining
active subsystems - so you can trim the model down to only the lenses
you trust without throwing the score off scale.
### Interpretation
| Composite (`tpi`) | Stance |
| ----------------------------------------- | -------------- |
| Above **Long Threshold** *(default `0`)* | Long |
| Below **Short Threshold** *(default `0`)* | Short |
| Between thresholds | Neutral / Cash |
A colored signal line is plotted on the **price chart** (overlay),
optional bar coloring is available, and a right-corner table reports
the current strength (%), rate of change, and position state.
### Configurable inputs
| Input | Default | What it changes |
| --------------------------------- | ------------------ | ------------------------------------------------------ |
| **Show Signal Line** | on | Plots a colored MA on price reflecting current regime. |
| **Show Trend Table** | on | Right-corner table with strength %, RoC, and position. |
| **Show Background Coloring** | off | Tints the chart background by regime. |
| **Show Bar Color** | off | Repaints candles by regime. |
| **Long / Short Thresholds** | `0` / `0` | Where the composite must cross to flip stance. |
| **Long / Short / Neutral Colors** | green / red / gray | Visual palette. |
## How to Use
### Cycle framing
Read **valuation** and **trend** as a 2×2 matrix - the combination tells
you what stage of the cycle the asset is in.
| Valuation | Trend Composite | Cycle Context |
| ----------------- | --------------- | ----------------------------------------------------------- |
| Deep negative | Neutral / Short | **Accumulation context** - bases are built here. |
| Positive | Strong Long | **Participate in expansion** - trend is doing the work. |
| Extended positive | Weakening | **Late cycle caution** - start trimming, tighten risk. |
| Negative | Short | **Distribution / unwind** - risk-off, capital preservation. |
### Workflow examples
* **Regime allocation** - increase exposure when trend is Long *and*
valuation is rising; reduce when trend is Short *and* valuation is
falling.
* **Signal gating** - only run shorter-term entry systems in the
composite trend's direction.
* **Sizing overlay** - scale smaller near upper-band stretches; scale
larger after valuation resets near zero.
* **DCA context** - accumulate while valuation is negative but
*stabilizing* (slope flattening), not while it's still falling.
* **Cross-asset rotation** - compare valuations across multiple assets
on the daily timeframe and rotate to where conditions are most
favorable.
## Alerts
Built-in alert conditions:
### Valuation alerts
| Alert | Fires when |
| --------------------------- | -------------------------------------------- |
| **Overbought Enter / Exit** | Valuation crosses into / out of the OB zone. |
| **Oversold Enter / Exit** | Valuation crosses into / out of the OS zone. |
| **Bullish Zero Cross** | Valuation crosses above 0. |
| **Bearish Zero Cross** | Valuation crosses below 0. |
### Trend alerts
| Alert | Fires when |
| ------------------------- | ------------------------------------------------------ |
| **Long-Term Trend Long** | Composite crosses above the long threshold. |
| **Long-Term Trend Short** | Composite crosses below the short threshold. |
| **Long-Term Trend Flip** | Composite crosses the short threshold (regime change). |
## Strengths
* **Separates cycle context from trend stance** - two questions, two
answers, no conflation.
* **Multi-component voting** - both layers use diverse subsystems so no
single component can drag the model off course.
* **Volatility-aware scaling** - keeps "extreme" meaningful across
changing regimes.
* **Per-component toggles + weights** - you can tune the model to your
preferred lenses without rewriting the script.
* **Clear visuals and alerts** - encourages long-horizon discipline
rather than minute-to-minute reactivity.
## Final Notes
The Long-Term Trend & Valuation Model is **not designed to catch every
swing**. It is built to keep you aligned with the dominant trend, help
manage risk around cycle extremes, and provide a consistent language
for allocation decisions across timeframes and assets.