# Fear & Greed Index

Also known as: CNN F&G.
A Breadth, Sentiment & External Data concept (Surveys & composite sentiment) in the LuxAlgo Library.

## What is the Fear & Greed Index?

The Fear & Greed Index is a composite sentiment gauge that compresses several market-based inputs into a single 0 to 100 reading, where low values label extreme fear and high values extreme greed. The best-known equity version, published by CNN Business, averages seven components: index momentum versus a 125-day average, 52-week highs versus lows, breadth of up versus down volume, the [put/call ratio](https://www.luxalgo.com/library/concept/put-call-ratio/), junk-bond demand via credit spreads, the [VIX](https://www.luxalgo.com/library/concept/vix/) relative to its recent average, and the relative performance of stocks versus bonds. Popular crypto variants weight volatility, momentum and volume, social activity, market dominance, and search trends instead.

The format has spread well beyond its origin. CNN's gauge, running since the early 2010s, made the 0 to 100 emotional dial a fixture of market commentary, and the crypto adaptation published by Alternative.me since 2018 became the reference version for that market. The branding is the point: each is an editorial compression of measurable crowd behavior into one number cheap to glance at and easy to over-trust.

The intended read is contrarian at the extremes: crowds tend to be most fearful near lows and most greedy near highs. The honest caveat is that extremes can persist. Markets can sit in extreme greed through long uptrends and in extreme fear through extended declines, and the component choices and weights are editorial decisions, not laws. It works better as a regime dial than as a trigger.

Because it is a composite, the reading is only as meaningful as its ingredients that session. A greed print driven by narrow index momentum while [advance/decline internals](https://www.luxalgo.com/library/concept/advance-decline-internals/) deteriorate is a different animal from one confirmed by broad participation, which is why practitioners check the components and the market's own internals, breadth gauges such as the [share of stocks above their moving averages](https://www.luxalgo.com/library/concept/percent-stocks-above-20-50-200-day-ma/), before treating the headline number as information.

## How to read the Fear & Greed Index

The gauge is published rather than computed from your chart, so reading it is about interpretation discipline.

1. Note the level against the published bands: the scale runs 0 to 100 with labeled zones from extreme fear through neutral to extreme greed.
2. Track the direction and speed of change: a fast collapse from greed toward fear often says more about conditions shifting than any static level does.
3. Open the components: identify which inputs drive the current reading, since a one-input extreme reads differently from a unanimous one.
4. Cross-check against the market's own internals, breadth, volatility, and [implied volatility](https://www.luxalgo.com/library/concept/implied-volatility/) measures, to see whether the composite agrees with what participation shows.
5. Log extremes rather than trading them: note the reading, then require price structure (a tradable low, a failing rally) to convert sentiment context into a position.

## How it's calculated

CNN's composite sentiment gauge averaging seven US equity market indicators into a score from 0 (extreme fear) to 100 (extreme greed).

```
FG_t = (1/7) × Σ_(i=1..7) S_i,t
S_i,t = raw reading of component i rescaled to 0..100, with 0 = extreme fear and 100 = extreme greed

  FG_t: Fear & Greed Index on day t (0 to 100)
  S_i,t: score of component i on day t (0 to 100)
  i: component index (1 to 7)
  t: trading day
  S_1: market momentum, S&P 500 close versus its 125-day SMA
  S_2: stock price strength, net new 52-week highs minus new lows on the NYSE
  S_3: stock price breadth, McClellan Volume Summation Index of advancing minus declining NYSE volume
  S_4: put and call options, 5-day average CBOE put/call ratio (inverted)
  S_5: junk bond demand, junk bond yield spread over investment-grade yield (inverted)
  S_6: market volatility, VIX versus its 50-day SMA (inverted)
  S_7: safe haven demand, 20-day stock return minus 20-day Treasury bond return
  SMA: simple moving average
  VIX: CBOE Volatility Index level
```

Inverted components are flipped in scoring so that their fear-side readings map toward 0.

CNN does not publish each component's exact rescaling, so third-party reconstructions differ slightly.

Crypto Fear & Greed indexes (e.g. alternative.me) use different inputs and weights and are separate gauges.

## How traders use it

- As contrarian context: extreme-fear readings during a decline prompt traders to start looking for bottoming structure, while extreme greed argues for tightening risk on longs rather than adding.
- As a position-sizing damper: some discretionary traders reduce new-trade size when the gauge sits at an extreme aligned with their trade direction, since crowded moves can unwind sharply.
- As a divergence check: price grinding to new highs while the index cools from extreme greed suggests the advance is losing emotional fuel, worth cross-checking against breadth measures like [new highs − new lows](https://www.luxalgo.com/library/concept/new-highs-new-lows/).
- As one panel in a cross-asset dashboard: sentiment extremes gain or lose credibility next to [intermarket](https://www.luxalgo.com/library/concept/intermarket-analysis/) reads, and in crypto next to [cycle models](https://www.luxalgo.com/library/concept/crypto-cycle-models/) and [on-chain valuation](https://www.luxalgo.com/library/concept/on-chain-valuation-suite/) context, which anchor the daily mood in slower structure.
- As a study input: because historical readings are published, the index can be backtested against forward returns on your market and horizon, which is the honest way to decide how much weight an extreme deserves.

## Fear & Greed Index vs other sentiment reads

- **VIX** (https://www.luxalgo.com/library/concept/vix/): The VIX is one market's direct price of near-term index option protection, a single clean input. The Fear & Greed Index blends seven such signals into an editorial composite; the VIX is in fact one of its components, normalized against its own average.
- **Advance/decline Internals** (https://www.luxalgo.com/library/concept/advance-decline-internals/): Breadth internals report raw participation: how many issues rose, fell, and on what volume. The composite compresses several such series into one number, gaining glanceability and losing the detail that tells you which part of the market is driving.
- **Crypto Cycle Models** (https://www.luxalgo.com/library/concept/crypto-cycle-models/): Cycle models frame where price sits relative to multi-year valuation structure; the crypto Fear & Greed reading is a daily mood print. They operate on different clocks, and the common pairing uses the model for position and the sentiment dial for timing caution.

## FAQ

### Is buying extreme fear a reliable strategy?

Not by itself. Extreme fear has historically coincided with some strong forward returns, but readings can stay pinned during extended declines, and a composite average knows nothing about your instrument or timeframe. Most practitioners require independent evidence, such as a tradable low forming in price structure, before acting on a sentiment extreme.

### Are the stock and crypto Fear & Greed indices the same thing?

No. They share the 0 to 100 contrarian framing but use different inputs: the equity version is built from market internals like breadth, options activity, and volatility, while common crypto versions mix volatility, momentum and volume, social media activity, bitcoin dominance, and search trends. Readings from one are not comparable to the other.

### Who publishes the Fear & Greed Index?

The equity original is published by CNN Business, updated through the trading day. The best-known crypto version is published daily by Alternative.me, and various platforms and analytics services publish their own re-creations of both. Since each publisher chooses its own inputs and weights, always check whose gauge you are reading before comparing levels or history.

### What are the seven components of the CNN index?

Stock price momentum (the S&P 500 versus its 125-day average), stock price strength (52-week highs versus lows on the NYSE), stock price breadth (up versus down volume), put and call options activity, junk bond demand (the spread between junk and investment-grade yields), market volatility (the VIX against its 50-day average), and safe haven demand (stock versus bond returns). Each is scored and the scores are averaged.

### Does extreme greed mean the market is about to fall?

No. It means conditions that have historically accompanied crowded optimism are present, and strong uptrends can hold the gauge in greed for weeks. The more defensible uses are asymmetric: tightening stops, trimming size, and demanding better entries while greed is extreme, rather than shorting a reading. Sentiment extremes are context for risk decisions, not standalone reversal calls.

### How is the crypto Fear & Greed Index calculated?

The Alternative.me version publishes its recipe in broad strokes: volatility versus recent averages, market momentum and volume, social-media activity, bitcoin's dominance share, and search-trend data, blended into the 0 to 100 scale (a surveys component exists but has long been paused). Exact weights and data handling are the publisher's editorial choices, which is worth remembering when treating the number as data.

## Related concepts

- Sentiment Surveys: https://www.luxalgo.com/library/concept/sentiment-surveys/
- Alternative Sentiment Data: https://www.luxalgo.com/library/concept/alternative-sentiment-data/
- Analyst Revision Breadth: https://www.luxalgo.com/library/concept/analyst-revision-breadth/
- Magazine-cover Indicator: https://www.luxalgo.com/library/concept/magazine-cover-indicator/

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Source: https://www.luxalgo.com/library/concept/fear-and-greed-index/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/