Fear & Greed Index

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, junk-bond demand via credit spreads, the 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 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.

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.