Fear and Greed Index

This page uses one scale throughout: below 25 is Extreme Fear, 25 to below 45 is Fear, 45 to 55 is Neutral, above 55 to below 75 is Greed, and 75 or more is Extreme Greed.

Each measure is first turned into its own score from 0 to 100 by comparing today with its recent history. Then the seven scores are averaged with equal weight. Each measure contributes one-seventh of the total; the overall reading reflects their combined scores.

Try it with round numbers. Suppose six measures each score 40, slightly fearful, and options traders suddenly turn very bullish so that one measure scores 100. The total is six times 40, which is 240, plus 100, for 340. Divide by seven and you get about 48.6. The index reads Neutral even though one input is at its maximum.

Volatility is a good example of an input. The VIX, published by Cboe, measures how much movement traders expect in the near term, based on S&P 500 option prices.³ When the VIX jumps above its recent average, that input moves toward fear. When several inputs move together, the total moves fast.

• As a mirror. When the index shows extreme fear and you feel like selling everything, you are feeling what the crowd feels.
• As context. A sharp drop in prices with extreme fear usually reflects worry, not a change in every company’s value.
• As a contrarian prompt. Some investors look harder for bargains in fear and get more careful in greed. That is a research prompt, not a rule.

Not reliably. Fear can deepen for weeks and greed can last for months. Trying to jump in and out on sentiment is market timing, which is hard to do consistently.² A plan you follow in every mood, such as investing a set amount each month, removes the need to guess.

The simplest version is dollar cost averaging: investing a fixed amount on a regular schedule, whatever the market is doing.⁴ It works quietly in fearful markets. Say you invest $500 a month in a fund. One month it costs $50 a share and you get 10 shares. The next month fear knocks it to $40 and the same $500 buys 12.5 shares.

After two months you own 22.5 shares for $1,000, an average cost of about $44.44 a share. The average of the two prices was $45. You bought more when prices were low without having to read the mood at all.

The other half of the plan is a cash cushion. The SEC suggests keeping readily available savings, up to six months of expenses for some people, so you are not forced to sell investments during a downturn.⁶ With bills covered, an extreme fear reading becomes something to notice rather than something to act on.

• No value judgment. Fear does not mean stocks are cheap; greed does not mean they are expensive.
• No forecast. Extreme readings can last longer than anyone expects.
• Delays. The reading may be cached; check the source time above the score.
• Just the total. This feed does not supply the seven separate measures or past readings.

Because a fall can keep going. A stock that drops 30% from $100 reaches $70. If it drops another 30%, it reaches $49, and a buyer at $70 has lost 30% even though they bought after the first fall. The fear reading only tells you investors are worried. It does not tell you whether the worry is too much or too little.

Research on investor behavior shows how moods feed on themselves. An SEC bulletin lists manias and panics, where crowds pile in and then sell all at once, and momentum investing, betting a trend will continue, among habits that hurt results.⁵ The index measures exactly those crowd swings.

Value comes from a company’s earnings, cash and prospects, which the index never looks at. Use the reading to understand the crowd, then judge any investment on its own numbers and your own plan.