Greed and fear index traditionally have been indicating market sentiment – emotions, attitude and behavior of traders and investors in the market. Sentiments Decoder have taken this concept of ‘greed and fear index’ or ‘greed and fear indicator’ or ‘market mood index’ and have recreated greed and fear index for each stock and indexes.
Table of Contents
How fear and greed indicator used?
An investor should use greed and fear index in the following manner:
- Green zone would be read as bullish zone i.e. market is getting greedy. As needle is progressing towards higher value in green zone, that means bullish strength in increasing.
- Red zone would be bearish zone i.e. market is being fearful. As needle is descending towards lower value on red zone, that would mean bearish strength is increasing.
- Orange zone would be sideways zone i.e. market is neutral. In this zone bulls and bears are having a tight fight to take control and move market in either direction.
How Sentiments Decoder has re-engineered it?
Sentiments Decoder has leveraged fear and greed index concept and build it for each stock and index for different time frames. It helps investor and traders to gauge market across different time frames and take decisions accordingly. Algorithm is built on price action analysis, where it analysis various factors to assess investor sentiment. These factors may include:
- Stock price momentum: Assessing whether the market is experiencing upward or downward trends.
- Market volatility: Measuring the degree of fluctuation in stock prices.
- Safe-haven demand: Examining the demand for safe-haven assets like government bonds or gold.
- Put/call ratio: Analyzing the ratio of options trading volume for put options (which bet on a stock’s decline) to call options (which bet on a stock’s rise).
- Market breadth: Assessing the number of rising and falling stocks in the market.
Some interesting facts!
- In general most of the publishers publishes greed and fear index at overall market level.
- Using greed and fear indicator at overall market level, it is difficult for investors to get actionable insights like
- The stocks in their watchlist, does it have required positive sentiment (is it in greed zone?)
- The sector of their stocks in the watchlist is also having positive sentiment?
- Is stock bullish sentiment reliable if overall sector is in bearish sentiments?
- Sentiments Decoder have solved for this problem building ‘Sentiment Dial’ for each stock and index.