"What has always mattered to me is the key factor that moves the stock market. This is not an analysis, statistics or facts,... no, these are human emotions. As soon as people understand this, they will become much closer to success in the markets" (Jesse Livermore - "The Great Bear", American stock trader, founder of day trading, prototype of the main character of the book "Memoirs of a stock speculator").An investor is like an astronaut at the launch of a rocket - it is these emotional overloads that he experiences every time he opens an exchange terminal. And it's not so important that a beginner or a mastodon does it. It is difficult for any person to control emotions, especially when there is a storm and panic in the markets, it is difficult not to succumb to the impulse and not make, perhaps, that "fatal" mistake. The biography of Jesse Livermore is an example of this - steep ups and downs, super profitable deals, one of which brought Jesse $ 100 million in 1929, and as a result, an 8-page suicide note and a bullet in the temple in the wardrobe of a New York hotel on November 28, 1940.Yes, markets are volatile, the market is ruled by emotions and often diametrically opposed - from overwhelming euphoria and buying up any assets to panic and total sales.The dream of any investor is to know what emotions the market is currently gripped by, where the quotes will swing up or down, what to do - sell or buy. And although the first official stock exchange has existed since 1773, it was only at the end of the XX century that stock market experts managed to create an acceptable indicator that most accurately reflects the dominant "mood" in the market and is able to predict its movement, those up or down. It's about the index of Fear&Greed index.What does the Fear & Greed index show?According to many experts, the movement of markets is largely determined by emotions. Emotions, in turn, shape the mood of investors. The indicator of the mood on the stock market at the moment is the fear and greed index Fear&Greed index. Greed and fear determine where the market will move. This is one of the most popular market indices and it helps not only traders, but also long-term investors. CNN Money is considered to be the developer of the index. The news service publishes real-time index data daily and for free on its website.The index developers are confident that understanding the general mood of investors helps to correctly predict market movements up or down. So, when fear dominates, stocks fall in price and trade below their fair value. If greed dominates among investors, then shares are actively bought up and they are traded much more expensive than they are in reality. In the words of Warren Buffett, "Be careful when others are greedy. And be greedy when others are cautious." It is possible to recommend investors to look at the fear and greed index before starting actions in the market and act directly opposite to the mood of the crowd - when it's scary - buy, and in the heat of excitement of other participants, sell! The guru's recommendation is quite simple, but effective.So, let's look at what the famous Fear and greed index for investors.Read more: The importance of volumes in the marketThe index itself is expressed as a percentage from 0 to 100, where 0 is extreme fear and 100 is extreme greed. The index looks like a speedometer with an arrow. The closer the arrow is to 0, the higher the fear, the closer to 100, the greater the greed. There are intermediate zones between the extreme values of 0 and 100. For convenience, they are painted in different colors: With the help of the index, you can see the predominance of fear or greed in the market not only at the current moment, but also in the past - a week, a month and a year ago.What does the index show and why is it needed? Fear Index&Greed is an indicator of market sentiment, which can determine the vector of further market movement with increased accuracy.Extreme fear reigns in the market, which means investors are inclined to sell assets. And we see this in the stock quotes in the previous few months, now and it is more likely that the sales will continue in the near future. This is a kind of "weather forecast" on the stock market and a signal to the investor to take an "umbrella" or put on a "headdress" so as not to get baked. To confirm the thesis, let's look at the charts of the S&P500 and Nasdaq indices. And here we will see a falling trend on both indicators.Methodology for calculating the Fear&Greed indexThe ratio of fear and greed in the market is calculated through 7 parameters that have equal weight in the index:Demand for protective assets. If market participants are more inclined to buy risky assets, such as stocks, then greed prevails among investors, and if they buy bonds, especially government bonds, then the market is dominated by fear. The flow of assets from risky to protective is an unambiguous signal to the investor for panic in the market and its imminent decline, a "down trend".Market momentum. Here we analyze how much the value of the S&P500 index is higher than its average over the past 125 days. The higher the index is from its average values, the more greed there is in the market and vice versa.Demand for "junk bonds". Junk bonds are bonds with a high yield, but a low credit rating, which means a high degree of risk. If the demand for such assets grows, then the market is at the mercy of the greed of investors. Conversely, if the demand for "junk" securities decreases, then investors panic and will soon begin to exit risky assets and shift to protective ones.The strength of the stock price. Here we compare the ratio of the number of shares that have reached their annual highs to the number of shares that have reached annual lows. A 52-week interval is taken. If the number of shares at the highs prevails, it indicates the greed of investors. If there are more stocks at minimum values, then fear reigns in the market, which means you can observe a large sale of risky assets.Market volatility or the VIX volatility index is an index that reflects market expectations regarding future volatility in the US market over the next 30 days. The value of the VIX index is formed from the prices of monthly options of the S&P500 index.Trading put and call options. Here, the volume of trades for the purchase or sale of assets is estimated. If there are more options to sell, then fear prevails in the market, if there are more options to buy, then greed.Market width. It estimates the trading volume of stocks that are rising and those that are falling in price. If the trading volume for rising stocks is higher, then investors are greedy, and if there are more trades for falling stocks, then investors are in fear.VIX Volatility Index and Fear and Greed indicatorAs you can see, the VIX volatility index is one of the 7 parameters for measuring the “Fear and Greed” index in the Fear market&Greed index. At the same time, the VIX volatility index is an independent and popular index among professional investors.In the financial literature, you can find mention of the author of the idea of creating a volatility index - American finance professor Robert Whaley. The first attempts to create an index, originally called Sigma, were made by Israeli scientists Mannheim Brenner and Dan Galey. In 1989, they wrote the article "New financial instruments for hedging changes in volatility". Many people liked the idea of creating a kind of barometer of stock market fluctuations, and already in 1990, the Chicago Options Exchange (ITS) called on Robert Whaley to help create a market volatility index, based not only on mathematical calculations, but also on the price dynamics of really traded futures contracts. Initially, only 8 put and call options in the S&P100 index were analyzed. Later, employees of the Chicago Stock Exchange and Goldman Sachs bank experts Devesh Shah and Sandy Rattray improved the index to a modern level, which became best known to investors as the VIX volatility index for the S&P 500 index.The graph shows how the VIX volatility index and the S&P500 correlate with each other. At the moments of the greatest drop in the S&P500 index, the values of the VIX index are at their highs.Often, the VIX volatility index is also called the investor fear index, but this is only partially true. The VIX index reflects exactly the expected volatility that it will be on the market in the coming month, and volatility, as we know, is a statistical financial indicator that characterizes the volatility of asset prices. So, predictions of the amplitude of future fluctuations in the market are shown by the VIX indicator, and the level of fear and greed of investors or their mood is shown by the Fear index&Greed. It is optimal for an investor to look at the values of both indices before opening or closing deals.Read more: The fear index VIX. Who and how earns on the nervousness of investorsLet's consider how the index of expected market volatility is calculated.The index itself is expressed as a percentage on a scale from 0 to 100, where 0 is the minimum volatility and 100 is the maximum. These are extreme values, the so-called extreme points, and the market has not seen such values yet.0 - 20% - low level of volatility in the market. Investors are optimistic, the market is in a growing trend. On the index of "Fear and Greed" at such a moment, the arrow is likely to be in the green zone. It is important to understand that the lower the 20% value of the VIX, the higher the probability of a close reversal and a trend break. This is a signal for investors to sell securities and fix profits.21-30% is the average level of volatility. These index values show investors relative stability in the market and volatility within standard deviations. There are no obvious signals for action. On the index of "Fear and Greed" at such a moment, the arrow is likely to be in the neutral gray zone.31-40% - increased level of volatility. During this period, it is better for beginners to refrain from shopping. On the other hand, for a trader, this is an excellent indicator of the approaching volatility in the market and the opportunity to earn. On the index of "Fear and Greed" at such a moment, the arrow is likely to be in the orange zone of fear.40% or more - panic in the market. Such indicators of the VIX index are most often accompanied by a rapid collapse of quotations. And this is a signal to investors to look for good entry points to the market. As soon as the fever subsides and the value of volatility begins to decrease, the stock price will go up again. Therefore, this is the best time to purchase securities. On the index of "Fear and Greed" at such a moment, the arrow is likely to be in the red zone of extreme fear.Let's test the hypothesis and look at the VIX Index on historical data.The VIX volatility index instantly reacts to the growth of volatility in the markets. Its peak values are reached during periods of mass sales on the market. During the same periods, the index of fear and greed is in the zone of Extreme Fear, extreme fear.Volatility index VIX = 29.69.The index of "Fear and greed" = 14.The S&P500 index is in a downtrend, the volatility in the markets is relatively high.It can be assumed that the indices are close in meaning and show, albeit in different ways, the levels of fear and greed of investors operating in the market. The higher the VIX value and the lower the Fear value&Greed, the higher the fear and volatility. The lower the VIX value and the higher the Fear level&Greed, the higher the greed of investors and the less volatility. Today to see the values of the Fear index&Greed is possible only in a small time interval - 1 year, and VIX values in a wider range - since its appearance - since 1990.Read more: What is the Volatility Index (VIX)?Peak values of fear in the US marketIf you look at the VIX index from 1990 to the present day, you can see 7 peak points when the index went above the comfortable values of 30 points, when the market recorded maximum volatility and a high level of uncertainty and fear.August 1998, VIX = 44 - collapse of the financial system of the USSR, default of T-bills.September 11, 2001, VIX = 33 - terrorist attack in the USA, the collapse of the twin towers.2002, VIX = 40 - a series of financial scandals in the United States, falsification of financial statements and bankruptcy of Enron Corporation.October 2008, VIX = 60 - the mortgage crisis in the United States and the global financial crisis.September 2011, VIX = 43 - the US debt ceiling crisis, when the credit rating agency Standard & Poors downgraded the credit rating of the US government due to the high risk of default on debt obligations.March 2020, VIX = 53.5 - the beginning of the coronacrisis.May 2022, VIX = 31.86 - geopolitical tensions due to the special operation in Ukraine, the impending global energy and food crisis.Unfortunately the Fear&Greed index cannot be seen in retrospect 1990-2022, but for example, let's see how in March 2020 the Fear index&Greed dropped from the level of 90 immediately to 5. From maximum greed to extreme fear at the moment (the index is available for viewing as a graph and as a "speedometer").Another recent example of the "peak" of investor sentiment from 75 points of greed to 8 points of extreme fear - from November 2021 to May 2022.Markets are volatile, the economy that determines the situation on the stock market is cyclical. The fear and greed index correlates with the broad market index, and therefore there is a certain cyclicity in the fluctuating values of the fear and greed index. And depending on the economic and geopolitical situation, the wave of the cycle narrows literally to several months or even days.Read more: Volatility: how to ride the waves of the market correctly and safelyPeak values of greed in the US marketThere are not so many minimum levels of fear, which means there are not so many peaks of "greed" of investors. But nevertheless, let's look at the graph:1993, 1995, 2007, 2013-2014, 2018, 2021 — years of minimal volatility and minimal fear and maximum greed in the US market. This is clearly visible on the S&P500 index chart. If the market is in a downtrend - VIX is in an uptrend and vice versa - the market is growing, VIX is declining. Recall that the VIX is a leading indicator, indicating future market volatility, not past or current.The index of fear and greed in cryptocurrencyThe crypto market does not lag behind the classical stock markets in any way. Since February 1, 2018, the index of "Fear and Greed" of bitcoin Crypto Fear has become available to crypto investors&Greed index. The principle of calculating the index and the way the result is displayed is similar to the basic Fear index&Greed index.The index of fear and greed in cryptocurrency (Crypto Fear&Greed index)Daily statistics. Every day, in real time, the indicators of the bitcoin volatility index can be seen in open access on the website of the Bitstat.top service.Multi-format data output. The results are displayed both in the form of a speedometer and colored zones, where red and orange - fear, gray - neutrality, light and dark green - greed of crypto investors. You can also see the data in retrospect from February 2018 and simultaneously see bitcoin quotes.Boundary values of the index. The cryptocurrency index of fear and greed also has values from 0 to 100 in a similar interpretation: 0 – fear, 100 – greed.The principle of calculating the index is based on 6 basic parameters. They differ somewhat from the classical index, and each parameter has its own weight in the final index value.The principle of reading the index value is similar to the Fear and greed index of the stock market: the index at the minimum indicates panic in the market when sales prevail over purchases. And on the contrary, a value close to the maximum indicates that investors are becoming greedy and their mass purchases can raise the prices of cryptocurrencies too high.A retrospective analysis of the index values in comparison with the exchange rate value of Bitcoin shows that the graphs of the two indicators have a direct correlation: the peak values of the value of the digital currency reached during periods when investors were gripped by greed:Since the beginning of April, the mood of crypto investors through the index value has been interpreted as extreme fear, and we see a rollback in the value of Bitcoin to the price level of 2020.Read more: Volatility: types, how to track and how to useConclusionOf course, the opening of the Fear&Gread, VIX, Crypto Fear indexes&Greed index is a great achievement in the world of investments and a significant help to investors around the world. All indices, one way or another showing the mood in the markets, significantly help traders and long-term investors to navigate more accurately in the investment ocean of opportunities. But it is worth remembering that this is just a guideline, a kind of "weather forecast" on the stock market, and you should not rely entirely on it.Of course, the extreme values of the "Fear and Greed" index are a signal for investors that unique opportunities are opening up in the market, both to buy good assets super cheap and to close positions, fixing profits before a trend change.