Have You Ever Used the Fear and Greed Index in Your Investments?
The Fear and Greed index, developed by CNN Money, is used to measure investor sentiment across the stock market on a scale from 0 (Extreme Fear) to 100 (Extreme Greed).
It is calculated using data from stock price strength, market volatility, market momentum and the like.
The assumption is that investors are driven by fear and greed. The fear of missing an opportunity or of losing on your investment.
The greed of wanting to make a fast buck and get rich quickly.
Extreme fear – investors are too worried – a buy opportunity.
Extreme greed – can raise prices too high – sell opportunity.
It’s claimed that this index is a good investment tool for pointing out buying and selling times. I’ve also heard that the tool works better in a volatile market like the crypto-currency market.
Others say it’s best to ignore investment sentiments of the moment – whether bullish or bearish – stick to your long – term plan based on company fact sheets and fundamentals. You can damage your portfolio if you are easily swayed by financial emotions. These emotions are sometimes driven by what is known as FOMO – the fear of missing out … seeking to have a piece of the cake.
I’ve never used this index. Have you?
In truth, it is the first time I have known such index. It seems that the indicator is calculated based on the current market conditions, price, volatility, momentum, etc. What differentiates it from another index such as RSI, which in principle also identifies the state of buyer and seller and is calculated from the current market situation. What is the main advantage of using this indicator in the short and long term?
Ahmad, the Greed and Fear index include other factors like volatility, surveys, dominance, trends, safe haven demand, put and call options and junk bond demand. These definitely differentiates it from the other indicators like RSI.
The RSI and this index both determine if the market is overbought or oversold.
If the market is oversold and presenting a buy opportunity, then the index will show that the market is Fearful.
They say the index is popular in both the stock and the crypto markets because in both markets, investors are emotional as can be seen in the asset prices.
I’m learning this from here for the first time, although I usually check cnn money I have not yet come across it. But I think it’s based on real life experience when one follows the it’s explained. Thank you very much for this information but I have come across it here for the first time.
In reality, it has happened to me several times. In fact that has been my problem in forex trading.
On the other hand, it think fear and greed index is used by everyone subconsciously without knowing. This is because no one wants to miss on an opportunity that’s gainful. Sometimes we my enter the market even when there are no strong trade set ups because of fear of losing an opportunity for profiting.
I have never using this index, it is my first time to heard about it, however, everyone has this index naturally, we also have degree fear when investing because no one wants to loose his money, and we too want to earn more money, or have lot. We experience this situation several times in our life.
Fear and greed had been the barrier to my success in trading foreign currency markets. If I can defeat this personal destructive weapon, I know, the time for my consist profit in will be achieved .
Like most people here this is the first time I have heard of this index. It is obviously something that was dreamt up by a journalist or a bored academic that needs to go and get a real job.
Fear and greed has been everyone major weakness in the business, most especially on the ones that will favour them