What is Fear and Greed Index?
The Fear and Greed Index is a single 0 to 100 reading of market sentiment, where low numbers mean fear and high numbers mean greed.
How it works
Publishers combine several inputs such as volatility, momentum and trading volume into one number. The best-known crypto version is published by Alternative.me and a separate stock-market version by CNN. The contrarian reading is to buy when fear is extreme and to be cautious when greed is extreme.
What it can't tell you
The inputs and weights are set by the publisher, and sentiment can stay at an extreme through an entire trend.
Does it work as a strategy?
Tickfloor backtested 6 rules that use the Fear and Greed Index, net of modelled trading costs, against a benchmark of the same assets. 3 rules were ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use the Fear and Greed Index, and a historical diagnostic, not validation under Testing Standard v2.
Tickfloor's research desk has backtested 517 strategies, most against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs). After correcting for the 598 tests run (Benjamini-Hochberg), 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.
Common questions
What is Fear and Greed Index?
The Fear and Greed Index is a single 0 to 100 reading of market sentiment, where low numbers mean fear and high numbers mean greed.
How does Fear and Greed Index work?
Publishers combine several inputs such as volatility, momentum and trading volume into one number. The best-known crypto version is published by Alternative.me and a separate stock-market version by CNN. The contrarian reading is to buy when fear is extreme and to be cautious when greed is extreme.
Does Fear and Greed Index work as a strategy?
Tickfloor backtested 6 rules that use the Fear and Greed Index, net of modelled trading costs, against a benchmark of the same assets. 3 rules were ahead of the benchmark on the point estimate, and none cleared the corrected bar (Benjamini-Hochberg q below 0.10). These are specific tested implementations, not every way to use the Fear and Greed Index, and a historical diagnostic, not validation under Testing Standard v2.
What are the limits of Fear and Greed Index?
The inputs and weights are set by the publisher, and sentiment can stay at an extreme through an entire trend.