Fear and Greed in the Stock Market – What Every Investor Should Know

It was sometime in 2022.

One of my favorite tech stocks suddenly plunged 12% in a single day.
I sat frozen, staring at the screen, thinking to myself:

“Should I sell now… before it drops even further?”

But instead of pulling up the stock chart again, I opened something else—
The CNN Fear & Greed Index.

Right there on the screen, it read:
“Extreme Fear”

I decided not to sell that day.
And sure enough, a few months later, the stock recovered.
That was the moment I started to trust the Fear & Greed Index as a key part of my investing process.

Table of Contents

Why Does Human Emotion Impact the Market?

The stock market doesn’t move on pure logic.
It moves on emotion—specifically, fear and greed.

Fear → “Sell everything” → Prices drop
Greed → “Buy more” → Prices rise

In the end, charts, trends, and volume are all reflections of how investors feel at any given moment.

What Is the Fear & Greed Index?

Developed by CNN Business, the Fear & Greed Index is a tool that visualizes investor sentiment using a score between 0 and 100.

The lower the score, the more fearful the market is.
The higher the score, the more greedy investors are acting.

Score Range	Market Emotion
0–24	Extreme Fear
25–49	Fear
50	Neutral
51–74	Greed
75–100	Extreme Greed

How Is the Index Calculated?

The index is built using seven key indicators, each representing a different aspect of market sentiment:

Market Momentum – Whether the S&P 500 is above or below its 125-day moving average
Stock Price Strength – Proportion of stocks hitting new highs vs lows
Put/Call Options Ratio – Sentiment in the options market
Market Volatility – VIX (volatility index) levels
Safe-Haven Demand – Demand for bonds over stocks
Junk Bond Demand – Appetite for high-risk assets
Stock Volume – Relative volume on up vs down days

Together, these metrics reflect the emotional state of the market and turn it into a single, easy-to-read score.

📈 How to Use It in Real-Life Investing

✅ 1. Extreme Fear = Buying Opportunity?

Some of the best investors see extreme fear as a signal to start buying.

“Be fearful when others are greedy, and greedy when others are fearful.”
— Warren Buffett

A great example:
In March 2020, right after the COVID-19 crash, the Fear & Greed Index hit rock bottom.
What followed? One of the fastest bull runs in history.

❌ 2. Extreme Greed = Caution Time?

On the flip side, when everything looks too good to be true,
it often is.

Surge in call option buying
VIX at very low levels
Market reaching all-time highs
Huge inflow of retail traders

These signs often appeared during the Dot-Com Bubble, the Bitcoin Mania, and other speculative booms.

Greed can be profitable—but also dangerous if unchecked.

Where Can You Check the Index?

You can find the live index here:
👉 https://edition.cnn.com/markets/fear-and-greed

Many global investors—including those in Korea—use this tool to get a sense of the broader mood of the U.S. market.

In Summary…

The stock market is a sea of emotions.
The Fear & Greed Index doesn’t predict the future—
But it shows how investors are feeling, which often matters just as much as the numbers.

Use it as a compass, not a crystal ball.

Final Thoughts

Even now, whenever the market gets shaky,
I check this index before I check any charts.
I don’t rely on it blindly—but I’ve found it’s a great way to ground my decisions in perspective, not panic.

When the market is driven by fear or greed, how do you react?

Feel free to share your thoughts and investing experiences in the comments.
I’d love to hear your story 😊

Amazon) Here are the latest Laptops you should consider

“This post contains affiliate links. If you use these links to buy something, I may earn a commission at no extra cost to you.”