Fear and Greed Index

Q: What is Fear and Greed?

CNN's 0-100 sentiment composite. 0 = extreme fear, 100 = extreme greed. Combines VIX, P/C ratios, breadth, junk bond demand, momentum, safe havens.

Q: How to use it for trading?

Contrarian: extreme fear (80) precedes pullbacks.

Q: Why does Fear & Greed Index matter for trading?

Fear & greed is one of the most-followed sentiment indexes. At historical extremes, it reliably flags the crowd's over-reaction — setting up contrarian trades. At normal levels, it's background noise. Used alongside put/call ratios and VIX, it forms a simple, effective sentiment filter.

Q: When is Fear & Greed Index good versus bad for a trader?

Good for contrarian longs at extreme fear readings and contrarian shorts (or hedge buys) at extreme greed. Mid-range readings carry no actionable signal — trade on other inputs. Always confirm extremes with price action before acting.

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.