Fear and Greed Index
Canonical definition, formula, interpretation, and API reference.
Definition
CNN market sentiment composite 0-100. Combines 7 indicators. Extreme fear = contrarian buying opportunity.
Formula
Composite of momentum, breadth, P/C ratio, VIX, junk bonds, safe havens, stock strength
Each indicator 0-100, averaged.
Inputs
market breadthP/C ratioVIXjunk bond spreadsmomentumsafe havens
Output
score (0-100)rating
Interpretation
- 0-25: Extreme Fear - historically a buying opportunity
- 25-45: Fear
- 55-75: Greed
- 75-100: Extreme Greed - precedes corrections
API Reference
Endpoint
GET /v1/stock/{symbol}/summary
Tier
Free
Response field
macro.fear_and_greed.score, rating
Why Fear & Greed Index Matters for Trading
TL;DR
Fear & greed is a 0-100 sentiment gauge. Under 20 = extreme fear (often local bottoms). Over 80 = extreme greed (often local tops).
- What it measures
- A composite sentiment index scaled 0-100 combining vol, breadth, safe-haven demand, put/call ratios, and momentum.
- What it signals
- Crowd sentiment extremes.
- Why we measure it
- Markets overshoot in both directions. The index flags the overshoots.
- Who uses it
- Contrarian traders, sentiment-model users, retail.
How to read Fear & Greed Index
Very low (< 20)
- Extreme fear, capitulation
- Historical local-bottom correlation
- Contrarian long setup
- Pair with IV spike
Good for: contrarian longs
Very high (> 80)
- Extreme greed, euphoria
- Historical local-top correlation
- Contrarian short / hedge setup
- Pair with IV compression
Good for: contrarian shorts, buying protection
40-60
- Normal sentiment
- No edge
- Trade on other factors
- Default reading
Normal
Rules of thumb
- Extremes can persist. A reading of 10 can go to 5 before reversing. Confirm with price action.
- Percentile rank matters. Compare to 5-year range, not absolute level.
- Pair with put/call ratio. Two sentiment gauges agreeing = stronger signal.
- Works best for index ETFs. Single-stock applicability is limited; index-level signal is cleanest.
- Not a timing tool alone. Provides context; entries require a pattern or event trigger.
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