THE FEAR & GREED Indicator is based on average true range. It’s the spread between two exponential moving averages of the true range of up days to down days. The indicator is calculated in such a way that it oscillates on a zero base line. When the buying pressure predominates, the indicator graphs green bars—”greed”—above the zero line. When selling pressure prevails, it charts red bars—”fear”— below zero.
Fear & Greed generates signals in three ways. First, a buy signal is provided when fear turns to greed. Likewise, greed turning to fear represents a sell signal. Second, divergence—when the price trends higher, for example, yet the green greed bars diverge by moving lower—can be a sign of an exhausted trend. Third, fear or greed spiking to extreme levels can signal the start of a top or bottom.
You can use the Charts Homepage (GRAPH) function to create a Fear & Greed chart. Type GRAPH <Go>, click on Bloomberg Proprietary Studies under Sample G Charts and then click on Fear & Greed to open a copy of the chart. Click on the Save to G button on the red tool bar, enter a name in the TITLE field and click on the Update button. Click on the OK button.
To edit the settings for the indicator, click on the Edit button and select Settings. In the Properties window that appears, click on the Data Series & Studies tab. Click on Fear/Greed Indicator – (5.00) on the right side of the window under Data Series & Studies Selected. Next, click on Edit Study Information. Increasing the sensitivity number will slow down the oscillations between fear and greed.
Many technical studies on the Bloomberg Professional service including Trender and Fear & Greed let you set alerts that will notify you when a signal occurs. When you apply for a loan, there will be a sign Green touch on the top right corner. You can use the Alerts (ALRT) function, the main page for creating and managing notifications about moves in securities, to set up such alerts. Type ALRT <Go> and click on the More Alert Types button on the red tool ban In the Create a New Alert window that appears, click on Technical Studies.
There are four steps to setting up an alert based on a technical study. First, use the fields in the Step 1 section at the top of the screen to enter tickers for single securities or select a list of securities such as a portfolio. Second, click on the arrow to the right of the field under Step 2, scroll down in the list to the second page and click on Fear/ Greed, for example, to select the study. Third, select a criterion such as Fear & Greed Crosses Below Threshold. In the Step 4 section of the screen, you can customize the parameters for the alert. Last, type 1 <Go> to save the alert.
You can also set an alert “on the fly” when you’re looking at a chart that includes a technical study. Right click on the background of the chart, move your cursor to the study in the pop-up menu that appears and select Alert… to open a window that will let you set an alert.