The Fear & Greed Index is a sentiment indicator.
It tries to measure how emotional the market is, not where price “should” go.

In simple terms:

• Fear = investors are anxious, defensive, risk-off
• Greed = investors are confident, aggressive, risk-on

The index usually runs from 0 to 100:

• 0–25 → Extreme Fear
• 25–45 → Fear
• 45–55 → Neutral
• 55–75 → Greed
• 75–100 → Extreme Greed

What it is based on

The index is typically built from a combination of factors, such as:

• Market momentum

• Market volatility (VIX)

• Put/Call ratios

• Market breadth

• Safe-haven demand (bonds vs stocks)

• Sometimes surveys or crypto-specific metrics

So it’s not magic. It’s a compressed emotional snapshot of the crowd.

The real purpose (this matters)

The index is not meant to be traded directly.

Its main purpose is:

• To contextualize price action

• To show when crowd psychology is stretched

Classic interpretation:

• Extreme fear often appears near panic selling

• Extreme greed often appears near overconfidence and late entries

Not a signal. A background filter.

Common mistake (don’t do this)

Bad thinking:

“Fear is high, so price must go up.”

Better thinking:

“Fear is high. If price shows acceptance and buyers step in, risk-reward may improve.”

The index does nothing by itself.
Price still decides.

How a disciplined trader uses it

• As macro sentiment context

• As a risk calibration tool

• To avoid:

  • Buying breakouts during euphoria

  • Panic-selling into emotional extremes

If price and structure disagree with the index, price wins. Always.

One-line summary

The Fear & Greed Index measures crowd emotion, not market direction, and is useful only when combined with price action and structure, not as a standalone trading signal.

That’s it. No fluff.