The Fear and Greed Index Calculator helps users evaluate the emotional state of the financial market. It combines several market indicators to produce a score from 0 to 100, where lower values reflect fear (risk aversion) and higher values show greed (risk appetite). This tool falls under the Financial Sentiment Analysis Tools category.
Traders and investors use this index to assess whether the market is overreacting due to emotion rather than fundamentals. A very high or very low score can signal potential turning points, helping investors adjust their strategies.
formula of Fear And Greed Index Calculator
Fear and Greed Index = (Σ (Normalized Indicator Score × Weight)) / Σ Weights
Where:
- Normalized Indicator Score is the score for each market indicator scaled between 0 (extreme fear) and 100 (extreme greed)
- Weight is the importance assigned to each indicator
- The final score is a single number between 0 and 100
Common Indicators Used
These indicators reflect a mix of momentum, volatility, volume, and sentiment:
- Market Momentum: S&P 500 vs its 125-day moving average
- Stock Price Strength: Number of stocks hitting 52-week highs vs lows
- Market Volatility: VIX index
- Put/Call Ratio: Options market sentiment
- Safe Haven Demand: Bond vs equity inflows
- Junk Bond Demand: Spread between junk and investment-grade bonds
- Market Breadth: Advancing vs declining volume
These components are individually scored, weighted, and aggregated into the final index value.
Reference Table: Key Fear & Greed Indicators
| Indicator | What It Measures | Sentiment Signal When High |
|---|---|---|
| Market Momentum | Price trend vs moving average | Greed |
| Stock Price Strength | Highs vs lows count | Greed |
| Market Volatility (VIX) | Market anxiety | Fear |
| Put/Call Ratio | Option market hedging behavior | Fear |
| Safe Haven Demand | Flow to bonds | Fear |
| Junk Bond Demand | Risk appetite in bond market | Greed |
| Market Breadth | Volume breadth | Greed |
This table offers insight into how each metric affects the overall index.
Example of Fear And Greed Index Calculator
Suppose we use 3 indicators, all equally weighted:
- Momentum Score = 70
- VIX Score = 40
- Breadth Score = 60
Fear and Greed Index = (70 + 40 + 60) / 3 = 56.67
A score of approximately 57 suggests moderate market optimism, leaning slightly toward greed.
Most Common FAQs
It means the market is showing strong signs of fear. Investors are cautious or bearish, often moving to safer assets like bonds or cash.
It is a useful sentiment tool but should not be used alone. It works best when combined with technical or fundamental analysis to validate market signals.
Retail traders, long-term investors, and financial analysts can all benefit. It provides a quick snapshot of market mood, which is useful in making risk-aware decisions.