Fear & Greed Index
A sentiment gauge showing on a 0–100 scale whether market participants are gripped by fear or carried away by greed — CNN's is famous.
In plain terms
The fear & greed index shows on a 0-to-100 scale whether market participants' mood is closer to "fear (selling in fright)" or "greed (buying in want)." Near 0 is extreme fear, near 100 extreme greed.
CNN's is the most famous. Bundling several signals — price action, volatility, safe-haven demand — it shows "the temperature of market sentiment" at a glance.
What it tells you
This gauge shows "what emotion others are in now." Interestingly, many investing maxims say "be fearful when others are greedy, and greedy when they are fearful" (Buffett), and this index is used as a tool to gauge that crowd psychology.
Extreme fear can be an oversold (sold too far) zone, and extreme greed an overheated zone, seen as a reference signal.
Formula
fear & greed index = bundling several signals (volatility, price momentum, supply-demand) into 0 (extreme fear) to 100 (extreme greed) (the CNN index is the leading one)
What high or low means
An index at extreme fear (low) is sometimes read as the market being excessively frightened, at extreme greed (high) as overheated. But this is only a reference, not a trade signal.
Peak fear is not necessarily the bottom, nor peak greed necessarily the top. An extreme can last longer.
Trying to call bottoms and tops with the fear & greed index is risky. If "extreme fear, so buy now" were always right, everyone would be rich. Sentiment is only a reference; do not set trade timing by it alone. (This is a concept explainer, not a trading suggestion.)
This index is a "composite gauge" bundling several signals, so the calculation differs by who makes it. It is right to use it as a reference for the mood, not an absolute standard.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Fear and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.