Fear & Greed Index
A sentiment gauge showing on a 0–100 scale whether market participants are gripped by fear or caught up in greed — CNN's version is the well-known one.
Fear & Greed Index = several signals such as volatility, price momentum, and supply/demand bundled together and shown on a scale of 0 (extreme fear) to 100 (extreme greed)
When the index shows extreme fear (low), the market is sometimes read as excessively frightened; extreme greed (high) as overheated.
In plain terms
The Fear & Greed Index shows, as a number from 0 to 100, whether the mood of people in the market right now is closer to "fear (selling out of anxiety)" or "greed (buying out of eagerness)." Near 0 means extreme fear, near 100 means extreme greed.
The one built by CNN is the most widely known. It bundles several signals — price trends, volatility, preference for safe assets — to show the "temperature of market sentiment" at a glance.
What it tells you
This indicator shows "what emotion others are feeling right now." Interestingly, many investing sayings advise to "be fearful when others are greedy, and greedy when others are fearful" (Buffett), and this index is used as a tool for gauging that crowd psychology.
Extreme fear may indicate an oversold (sold off too much) zone, and extreme greed an overheated zone — it is read as a reference signal for that.
Formula
Fear & Greed Index = several signals such as volatility, price momentum, and supply/demand bundled together and shown on a scale of 0 (extreme fear) to 100 (extreme greed) (CNN's index is the representative one)
What high or low means
When the index shows extreme fear (low), the market is sometimes read as excessively frightened; extreme greed (high) as overheated. But this is only a reference, not a trading signal.
Fear reaching an extreme does not necessarily mean a bottom, nor does extreme greed necessarily mean a top. Extremes can last longer than expected.
Trying to pinpoint bottoms and tops with the Fear & Greed Index is risky. If "it's extreme fear, so buy now" always worked, everyone would be rich. Sentiment is a reference indicator for measuring the mood of the market. (This is a conceptual explanation, not a trading suggestion.)
This index is a "composite indicator" that bundles several signals, so the calculation differs by whoever builds it. It is fitting to use it as a reference for the mood rather than as an absolute standard.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see SEC-filing-based financial metrics alongside the sector benchmark.
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.