How to gauge fear in the markets

Knowing how much 'fear' there is in the markets can tell you whether it's time to hunt for bargains or batten down the hatches. Tim Bennett explains.

Markets are driven by two key emotions: greed and fear. If you want to be successful, as Warren Buffett once said, you should "be fearful when others are greedy, and be greedy when others are fearful".

In other words, you want to be buying when people are scared stiff, and selling when they're overly complacent. But how can you measure the level of fear in the markets? Here are three of the most useful early warning signs used by City insiders.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.