> For the complete documentation index, see [llms.txt](https://docs.candelacharts.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.candelacharts.com/investing/market-valuation-and-on-chain/shiller-pe-ratio/usage.md).
# Usage
Use the Shiller PE Ratio to move from tracking momentum to identifying generational value opportunities.
* **Generational Investing**: Identify buying opportunities when the ratio enters the **Extreme Undervalued** (Cyan/Blue) zones.
* **Risk Management**: Exercise caution or hedge positions when the ratio enters the **Extreme Overvalued** (Red) zone, as forward 10-year returns are historically lower from these levels.
* **Mean Reversion Trades**: Use the **Historical Mean** as a long-term target; markets that stretch too far from the mean often eventually revert.
* **Smoothing Analysis**: Adjust the smoothing input to filter out monthly noise and focus on the secular valuation trend.
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