Documentation
Chronometrics Alpha Methodology
A quantitative trading intelligence framework built on a 4-layer signal stack. Every signal, weight, gate, and decision rule is documented and traceable. This page explains how the system works — from macro regime to execution timing.
The 4-Layer Framework
Every signal rolls up through four layers, each answering a different question. Priority when layers conflict: L1 > L2 > L3 > L4. A hostile macro regime (L1) can override everything below it.
Composite Scoring & Gauge
How Scoring Works
- ▸Each indicator contributes a signed score (−2 to +2 default range).
- ▸Critical indicators (Zero-FP Tier 1, AVIV) use extended −3 to +3 ranges.
- ▸Layer-strength multipliers are applied before summation.
- ▸Final composite is clamped to ±24 for display purposes.
- ▸The composite maps to one of 7 verdict bands determining action posture.
Layer Priority & Overrides
- L1Macro gates can override any lower-layer signal. Hostile macro = capped allocation.
- L2Cycle position defines the structural bias. Counter-cycle trades require multiple L3 confirmations.
- L3On-chain evidence confirms or rejects the L2 directional bias with cohort-level data.
- L4Execution timing refines entry quality. Does not override structural L1-L3 signals.
Composite Gauge Visualization
SELL−8−20+2+8+24
BUY
Verdict Bands
The composite score maps to one of 7 verdict bands. Each band defines the system's action posture — from full-size deployment to capital preservation.
| Score Range | Verdict | Meaning |
|---|---|---|
| ≥ +16 | STRONG BUY | Multiple layers at capitulation extreme, high-conviction bottom window |
| +8 to +15 | BUY | Cycle + on-chain both align bullish |
| +2 to +7 | MILD BUY | Conditions lean bullish, partial conviction |
| −1 to +1 | WAIT | Indicators disagree or cancel out — no edge |
| −2 to −7 | MILD SELL | Conditions lean bearish |
| −8 to −15 | SELL | Cycle + on-chain align bearish, distribution confirmed |
| ≤ −16 | STRONG SELL | Multiple layers at euphoric extreme |
Indicator Reference
Complete reference of all 29 indicators across the 4-layer framework. Each indicator has a defined score range, bullish/bearish thresholds, and a description of what it measures and how it's used.
| Indicator | L | Score Range | Bullish Signal | Bearish Signal |
|---|---|---|---|---|
M2 Money Supply YoY Global liquidity proxy. Expanding M2 fuels risk assets; contraction starves them. | 1 | −2 to +2 | Accelerating expansion (> 3% YoY) | Contracting or decelerating (< 0%) |
DXY (3-Month Trend) USD strength compresses global risk appetite. Rolling-over DXY opens capital flows to risk assets. | 1 | −2 to +2 | Sustained weakening (risk-on) | Sustained strengthening (risk-off) |
BTC-SPX Correlation Measures whether BTC is trading as risk-on proxy or independent store of value. | 1 | −1 to +1 | Decoupling (BTC outperforming SPX) | High correlation in risk-off mode |
Fed Balance Sheet Central bank balance sheet expansion directly injects liquidity into financial system. | 1 | −2 to +2 | Expanding (QE or BTFP-style liquidity) | Contracting (QT / tightening) |
Yield Curve (2s10s) Inversion warns of recession risk. Steepening after inversion often precedes recovery. | 1 | −1 to +1 | Steepening (growth expectations) | Persistent inversion (recession signal) |
Reverse Repo Facility Rapid RRP drain signals liquidity exhaustion. Used as a leading reserve-liquidity indicator. | 1 | −2 to +2 | Stable or rising (excess liquidity buffer) | Rapid draining toward zero |
Real Yield (TIPS) Real yields reflect true cost of capital. High real yields compete with risk assets. | 1 | −2 to +2 | Falling real yields | Rising real yields (> 2%) |
HY Credit Spread High-yield spreads are a real-time fear gauge. Widening signals credit-market stress. | 1 | −2 to +2 | Tightening spreads (risk appetite) | Widening spreads (credit stress) |
VIX Equity volatility regime. Extreme VIX (>35) often marks near-term bottoms in risk assets. | 1 | −2 to +2 | Below 20 (complacency / trend-friendly) | Above 28-30 (fear / volatility regime) |
Copper (Dr. Copper) Copper prices lead industrial activity. Widely regarded as a global growth barometer. | 1 | −1 to +1 | Rising (global industrial demand) | Falling (growth slowdown signal) |
USD/CNY China FX policy and EM risk appetite proxy. Weak CNY often precedes broader EM stress. | 1 | −1 to +1 | CNY strengthening (risk appetite) | CNY weakening (EM stress) |
MA Stack Regime (Weekly) Weekly moving average hierarchy defines trend regime. Crossovers mark phase transitions. | 2 | −2 to +2 | 9w > 20w > 50w (bullish alignment) | 9w < 20w < 50w (bearish alignment) |
AVIV Ratio Active-to-investor-value ratio from Cointime Economics. Flags cycle bottoms and euphoric tops. | 2 | −3 to +3 | < 0.75 (extreme undervaluation) | > 2.5 (extreme overvaluation) |
Halving Regime Supply-shock calendar. Historically, strongest risk-adjusted returns occur in the 6–18 month post-halving window. | 2 | −2 to +2 | 6–18 months post-halving | Late cycle (> 36 months post-halving) |
Bottom Proximity Score Composite score blending AVIV, drawdown depth, duration, MA compression, and volume-climax detection. | 2 | −2 to +2 | High proximity (> 70% composite) | Low proximity (< 30%) |
Drawdown from ATH Depth of drawdown provides context. Deep drawdowns in bull cycles are historically accumulation zones. | 2 | −2 to +2 | > 60% drawdown (historical accumulation zone) | < 15% drawdown (near-top distribution) |
Zero-FP Tier 1 Flags when cohort-level capitulation signals align. Highest-weight on-chain signal in the framework. | 3 | −3 to +3 | 3–4 / 4 conditions met | 0 / 4 conditions met |
LTH MVRV Measures unrealized profit multiple of coins held > 155 days. Undervaluation below 1.0. | 3 | −2 to +2 | < 1.0 (long-term holders underwater) | > 3.7 (long-term holders at extreme profit) |
STH MVRV Measures unrealized profit of recent buyers. Capitulation below 0.85; greed above 1.4. | 3 | −2 to +2 | < 0.85 (short-term holder capitulation) | > 1.4 (short-term holder overheating) |
Liveliness Ratio of coin-days destroyed to coin-days created. Declining = accumulation; rising = distribution. | 3 | −1 to +1 | Declining (HODLing behavior dominates) | Rising (old coins being spent / distributed) |
Realized Loss (Daily) On-chain loss realization. Extreme loss days historically mark capitulation bottoms. | 3 | −2 to +2 | Extreme realized loss day (capitulation) | No significant loss / profit-taking dominant |
US Spot Premium Coinbase premium vs offshore exchanges. Premium signals US institutional buying pressure. | 3 | −1 to +1 | Sustained premium (> 0.5%) | Persistent discount |
IBIT / ETF Flow Activity Spot ETF flow direction. Confirms or conflicts with on-chain cohort behavior. Lag-aware confirmation only. | 3 | −1 to +1 | Sustained net inflows | Sustained net outflows |
LTH SOPR Spent Output Profit Ratio for long-term holders. LTH selling at loss is historically bullish. | 3 | −2 to +2 | < 0.98 (selling at loss = accumulation) | > 1.05 (sustained profit-taking) |
Funding Rate (Annualized) Perpetual swap funding rate. Extreme negative = shorts paying longs (contrarian bullish). Extreme positive = longs crowded. | 4 | −2 to +2 | Deeply negative (< −20% ann.) | Highly positive (> +54% ann.) |
DVOL (Deribit Volatility Index) BTC implied volatility index. Vol regime context: high vol + price down = potential bottom; low vol + price up = caution. | 4 | −2 to +2 | High vol with price down (capitulation vol) | Low vol with price up (complacency) |
IV Term Structure Shape of the implied volatility curve. Backwardation signals near-term fear/uncertainty — often a bottoming signal. | 4 | −1 to +1 | Backwardation (near-term IV > far-term) | Steep contango (far-term IV >> near-term) |
25Δ Skew (Put-Call) Measures relative demand for OTM puts vs calls. Extreme put skew = contrarian bullish signal. | 4 | −1 to +1 | Extreme put skew (hedging demand = fear) | Call skew dominance (speculative froth) |
OI / Market Cap Ratio Open interest relative to market cap. High OI/market-cap flags crowded positioning and liquidation cascade risk. | 4 | −2 to +2 | Low (< 1.5%) — unleveraged market | High (> 3.0%) — over-leveraged, liquidation risk |
Confluence Decision Rules
These rules govern how the system resolves conflicting signals and determines capital deployment. They are applied after the composite score is calculated.
Meta-rule: The system is always more conservative about adding risk than preserving capital. Missing a cycle bottom by 10% is annoying. Deploying full size 3 months before the real bottom costs 30–40%. When in doubt, wait for confirmation.
Out-of-Sample: The framework was designed and backtested on market data from 2015–2025, covering 3 full cycles and one cycle top. The current cycle is the first true out-of-sample test. All methodology is documented, all signals are traceable, and every verdict shows its work.