The fear and greed index at 90 indicates an extreme level of greed in the market. In the context of cryptocurrency trading, this usually means that the market is at a peak of optimism, and prices are likely inflated due to the euphoria of participants. Here’s what this might mean:
Long or short?
1. Short:
A high level of greed often signals a possible correction or downward trend reversal, as the market is overheated, and many participants may start to take profits. This makes shorting potentially a more profitable strategy under such conditions.
2. Long:
Going long at such an index can be risky, as the probability of a correction is higher. However, if you believe in the continuation of the upward trend and the fundamental indicators remain strong, going long may be justified, but with a high degree of caution.
Recommendations:
- Analyze volumes and price dynamics. If signs of trend exhaustion are observed (such as divergence in indicators or decreasing volumes), this strengthens the signal for shorting.
- Stay updated with the news. Positive news can temporarily support growth, but any negative news may intensify sell-offs.
- Risk management. Use stop-losses and do not enter the market with your entire capital to minimize losses in case of misjudgment.
Conclusion:
The fear and greed index at 90 often serves as a warning that the market may be close to a reversal. For most traders, this is a suitable moment for cautiously opening shorts or taking profits on long positions.