Long-Term Trend & Valuation Model [Backquant]

Long-Term Trend & Valuation Model [BackQuant]

Invite-only. A universal long-term valuation strategy and trend model built to work across markets, with an emphasis on crypto where cycles and volatility are large. Intended primarily for the 1D timeframe. Inputs should be adjusted per asset to reflect its structure and volatility.

If you would like to checkout the simplified and open source valuation, check out:

What this is
A two-layer framework that answers two different questions.
• The Valuation Engine asks “how extended is price relative to its own long-term regime” and outputs a centered oscillator that moves positive in supportive conditions and negative in deteriorating conditions.
• The Trend Model asks “is the market actually trending in a sustained direction” and converts several independent subsystems into a single composite score.
The combination lets you separate “where we are in the cycle” from “what to do about it” so allocation and timing can be handled with fewer conflicts.

Design philosophy
Crypto and many risk assets move in multi-month expansions and contractions. Short tools flip often and can be misleading near regime boundaries. This model favors slower, high-confidence information, then summarizes it in simple visuals and alerts. It is not trying to catch every swing. It is built to help you participate in the meat of long uptrends, de-risk during deteriorations, and identify stretched conditions that deserve caution or patience.

Valuation Engine, high level
The Valuation Engine blends several slow signals into one measure. Exact transforms, windows, and weights are private, but the categories below describe the intent. Each input is standardized so unlike units can be combined without one dominating.

• Momentum quality — favors persistent, orderly advances over erratic spikes. Helps distinguish trend continuation from noise.
  
• Mean-reversion pressure — detects when price is far from a long anchor or when oscillators are pulling back toward equilibrium.
  
• Risk-adjusted return — long-window reward to variability. Encourages time in market when advances are efficient rather than merely fast.
  
• Volume imbalance — summarizes whether activity is expanding with advances or with declines, using a slow envelope to avoid day-to-day churn.
  
• Trend distance — expresses how stretched price is from a structural baseline rather than from a short moving average.
  
• Price normalization — a long z-score of price to keep extremes comparable across cycles and symbols.
  

How the Valuation Engine is shaped

• Standardization — components are put on comparable scales over long windows.
  
• Composite blend — standardized parts are combined into one reading with protective weighting. No single family can override the rest on its own.
  
• Smoothing — optional moving average smoothing to reduce whipsaw around zero or around the bands.
  
• Bounded scaling — the composite is compressed into a stable, interpretable range so the mid zone and extremes are visually consistent. This reduces the effect of outliers without hiding genuine stress.
  
• Volatility-aware re-expansion — after compression, the series is allowed to swing wider in high-volatility regimes so “overbought” and “oversold” remain meaningful when conditions change.
  
• Thresholds — fixed OB/OS levels or dynamic bands that float with recent dispersion. Dynamic bands use k times a rolling standard deviation. Fixed bands are simple and comparable across charts.
  

How to read the Valuation Oscillator

• Above zero suggests a supportive backdrop. Rising and positive often aligns with uptrends that are gaining participation.
  
• Below zero suggests deterioration or risk aversion. Falling and negative often aligns with distribution or with trend exhaustion.
  
• Touches of the upper band show stretch on the optimistic side. Repeated tags without breakdown often occur late in cycles, especially in crypto.
  
• Touches of the lower band show stretch on the pessimistic side. They are common in washouts and early bases.
  

Visual elements

• Valuation Oscillator — colored by sign for instant context.
  
• OB/OS guides — fixed or dynamic bands.
  
• Background and bar colors — optional, tied to the sign of valuation for quick scans.
  
• Summary table — optional, shows the standardized contribution of the major categories and the final composite score with a simple status icon.
  

Trend Model, composite scoring
The trend side aggregates several independent subsystems. Each subsystem issues a vote: long, short, or neutral. Votes are averaged into a composite score. The exact logic of each subsystem is intentionally abstracted. The families below describe roles, not formulas.

• Long-horizon price state — checks where price sits relative to multiple structural baselines and whether those baselines are aligned.
  
• Macro regime checks — favors sustained risk-on behavior and penalizes persistent deterioration in breadth or volatility structure.
  
• Ultimate confirmation — a conservative filter that only votes when directional evidence is persistent.
  
• Minimalist sanity checks — keep the model responsive to obvious extremes and prevent “stuck neutral” states.
  
• Higher timeframe or overlay inputs — optional votes that consider slower contexts or relative strength to stabilize borderline periods.
  

You define two cutoffs for the composite: above the long threshold the state is Long, below the short threshold the state is Short, in between is Cash/Neutral. The script paints a signal line on price for an at-a-glance view and provides alerts when the composite crosses your thresholds.

How it can be used

• Cycle framing in crypto — use deep negative valuation as accumulation context, then look for the composite trend to move through your long threshold. Late in cycles, extended positive valuation with weakening composite votes is a caution cue for de-risking or tighter management.
  
• Regime-based allocation — increase risk or loosen take-profits when the composite is firmly Long and valuation is rising. Decrease risk or rotate to stable holdings when the composite is Short and valuation is falling.
  
• Signal gating — run shorter-term entry systems only in the direction of the composite. This reduces counter-trend trades and improves holding discipline during strong uptrends.
  
• Sizing overlay — scale position sizes by the magnitude of the valuation reading. Smaller sizes near the upper band during aging advances, larger sizes near zero after strong resets.
  
• DCA context — for long-only accumulation, schedule heavier adds when valuation is negative and stabilizing, then lighten or pause adds when valuation is very positive and flattening.
  
• Cross-asset rotation — compare symbols on 1D with the same fixed bands. Favor assets with positive valuation that are also in a Long composite state.
  

Interpreting common patterns

• Early build-out — valuation rises from below zero, but the composite is still neutral. This is often the base-building phase. Patience and staged entries can make sense.
  
• Healthy advance — valuation positive and trending up, composite firmly Long. Pullbacks that keep valuation above zero are usually opportunities rather than trend breaks.
  
• Late-cycle stretch — valuation pinned near the upper band while the composite starts to weaken toward neutral. Consider trimming, tightening risk, or shifting to a “let the market prove it” stance.
  
• Distribution and unwind — valuation negative and falling, composite Short. Rallies are treated as counter-trend until both turn.
  

Settings that matter
Timeframe
This model is intended for 1D as the primary view. It can be inspected on higher or lower frames, but the design choices assume daily bars for crypto and other risk assets.
Asset-specific tuning
Inputs should be adjusted per asset. Coins with high variability benefit from longer lookbacks and slightly wider dynamic bands. Lower-volatility instruments can use shorter windows and tighter bands.

Valuation side

• Lookback lengths — longer values make the oscillator steadier and more cycle-aware. Shorter values increase sensitivity but create more mid-zone noise.
  
• Smoothing — enable to reduce flicker around zero and around the bands. Disable if you want faster warnings of regime change.
  
• Dynamic vs fixed thresholds — dynamic bands float with recent dispersion and keep OB/OS comparable across regimes. Fixed bands are simple and make inter-asset comparison easy.
  
• Scaling and re-expansion — keep this enabled if you want extremes to remain interpretable when volatility rises.
  

Trend side

• Composite thresholds — widen the neutral zone if you want fewer flips. Tighten thresholds if you want earlier signals at the cost of more transitions.
  
• Visibility — use the price-pane signal line and bar coloring to keep the regime in view while you focus on structure.
  

Alerts

• Valuation OB/OS enter and exit — the oscillator entering or leaving stretched zones.
  
• Zero-line crosses — valuation turning positive or negative.
  
• Trend flips — composite crossing your long or short threshold.
  

Strengths

• Separates “valuation context” from “trend state,” which improves decisions about when to add, reduce, or stand aside.
  
• Composite voting reduces reliance on any single indicator family and improves robustness across regimes.
  
• Volatility-aware scaling keeps signals interpretable during quiet and wild markets.
  
• Clear, configurable visuals and alerts that support long-horizon discipline rather than frequent toggling.
  

Final thoughts
This is a universal long-term valuation strategy and trend model that aims to keep you aligned with the dominant regime while giving transparent context for stretch and risk. For crypto on 1D, it helps map accumulation, expansion, distribution, and unwind phases with a single, consistent language. Tune lookbacks, smoothing, and thresholds to the asset you trade, let the valuation side tell you where you are in the cycle, and let the composite trend side tell you what stance to hold until the market meaningfully changes.