The sentiment is one of the important factors that greatly influence the price of cryptocurrencies. Among them, fear and greed are the most powerful emotions that can greatly influence investor behavior. Today’s article lets’s find out what the fear and greed index is? How to read this indicator as well as how accurate it is, let’s find out in detail through the following article.
What is the Fear and Greed Index?
Fear and Greed Index, also known as the index of greed and fear. This is also an indicator used by many people in the market today to capture the market sentiment. As the name implies, this indicator will help people know at the moment of looking at the indicator whether the market is greedy or scary.
It is thanks to this complete observation that the user can come up with the most suitable trading strategies. What is the Fear and Greed Index? This must be an indicator that not only appeared for the first time in the Crypto market but it was created by CNNMoney to analyze the stock market in the traditional form. At the same time, Alternative. I created a version corresponding to the cryptocurrency market side.
How to read the Fear and Greed Index
Thus, the Fear and Greed Index is an indicator, though not entirely correct, for the cryptocurrency investment market. However, in fact, this is still an extremely interesting indicator when it comes to describing the general atmosphere at a certain time in the market. At the same time, this also helps a lot for investors to see the market. So what is the way to read the Fear and Greed Index?
How to read the index
So to better understand how to read this Fear and Greed Index, let’s follow the following illustration:
In order from left to right
- Figure 1: This is the Fear and Greed Index chart.
- Figure 2: Fear and Greed Index values include last month, last week, yesterday and present.
- Figure 3: This is the time for the next Fear and Greed Index update.
Accordingly, the Fear and Greed Index are also numbers that are run from 0 to 100:
- From 0 to 49 will represent fear (Fear).
- From 51 to 100 will represent greed (Greed).
- 50 would correspond to a neutral market.
However, in the case of a more detailed division, the colors on the chart will have the following specific meanings:
- From 0 to 24: with orange being the ultimate fear
- From 25 to 49: with yellow being fear
- From 50 to 74: with light blue being greedy
- From 75 to 100: with green is extreme greed
Fear and Greed Index Accuracy
Similar to other indicators today, the Fear and Greed Index is currently quite accurate, but this indicator is not always correct. So to be able to make a trading decision, analysts will usually combine a number of other numbers today. For example, on-chain data of the assets you want to trade, chart analysis, and on-chain data of ETH and BTC to see the general situation.
Since the Fear and Greed Index currently controls the overall situation of the market and updates very slowly, it only provides an overview of the market and is only suitable for longtime players. If you are a short-term trader and close your order within the same day or a few days later, then this indicator may not be necessary anymore.
In addition, there is no data to show what the number must be achieved, then there is a move in the market. As such, this also means that everyone can tell when the market is greedy and there will be a strong correction. However, the problem here is how much the Fear and Greed Index will be adjusted, and to what extent.
How much is the Fear and Greed Index reaching to adjust?
So how much Fear and Greed Index will be adjusted? Accordingly, this is one of the questions that we absolutely cannot know in advance. Therefore, this Fear and Greed Index cannot be used to help you predict when the market will correct.
Besides, in the Bull or Bear market, sometimes the index will tilt in the opposite direction. However, this will not mean that the market has completely stopped trending and at the same time changed direction. This is quite possibly a small correction to establish a more sustainable large down/uptrend.
Thus, it can be seen that the Fear and Greed Index is an indicator even though it is not completely accurate. But this is still an extremely interesting indicator when it comes to describing the general atmosphere at a certain time about the market. At the same time, this also helps a lot to see your market. Hopefully, the information about the concept of Fear and Greed Index will help you better understand this indicator and use it effectively.