A Fear/Greed Index can be used by any trader or investor but I believe it's best viewed with a contrarian's eye--
When the market appears to be signalling Extreme Fear, that is a good place to start buying from emotional players who want to sell no matter the price
When signalling Extreme Greed, that may be a good place to start taking profits off or getting hedged, as there may be too much exuberance in the air
Important to note and remember, however, is that there can often times be fear in the air for good reasons! I like to see this as if we dip into extreme fear and return shortly after, the fear may warrant constraint from buying, or returning back to extreme greed may be a very strong market extension
The script draws from several other tickers which I have read and personally observed to be decent macro correlations for the stock market (specifically the SP500). For the state of each of these metrics I gave a rating, good or bad, then added them together and put it into your standard Stochastic.
These macro correlations include--
The % of stocks in the SP500 above multiple Simple Moving Average lengths
VIX and its term-structure (contango, backwardation)
Treasury Bonds
Gold
Junk/High Yield Bonds
The Put/Call Ratio
The SP500 Options Skew
Advancing and Declining Issues
On some of these I opted to use a function for the Relative Momentum Index instead of RSI, as the RMI oscillates better (in my opinion). I also used a Band-Pass Filter/Double EMA for smoothing the results of the stochastic.
A LOT of these numbers were made to my own observation and discretion and can get out-dated over time. With that said, PLEASE feel free to revise, fine tune, modify this as you wish to optimize yours. And please let me know if I have made any mistakes here or something should be added.
Dear Sir, After I add Fear/Greed Index in to my chart. There are just shown the window with name of the indicator only. Then I checked the scripts they specific
"line 152: The `transp` argument will be deprecated soon. We recommend using color.new() or color.rgb() functions to specify the transparency of the plots instead. line 153: The `transp` argument will be deprecated soon. We recommend using color.new() or color.rgb() functions to specify the transparency of the plots instead."
Could you please advice how can I use the "Fear/Greed Index" ? Appreciate that.
kvdn88
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How do I read this, is 100 most fear and 0 most greed?
Is there anyway to flip it so that most greed (green) is on top, rather than the bottom? :)
Abzorba
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I think this is the best F&G indictor out there. Great work!
wenjiebai496852768
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Not fitting the BTC chart very well
HuajieTraders
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this works great, thank you SIr!
wjw668
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This is helpful. Thanks so much !
yo_yo_1
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Small thing to check, the second PCC ratio check I think should read <= 0.65, not >= if you ever do an update
AlgoDayTrading
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Anyone have any guidance on how to update this? I am cross checking with CNN Fear & Greed Index and the numbers don't track anymore.