If you interested in option trading then you must be very conversant and understand various option trading indicators. These option trading indicators are your guide to interpreting the market effectively. The better your knowledge of these trading indicators, the greater your chances of making a huge profit from your trades. Your ability to make decision based on information from the options trading indicators ensures that you are not just making emotional decision but factual ones. Learning about options trading indicators is very essential to your activity as a trader.
There are six essential option trading indicators that you cannot do without. These will form the core of most of the option trading decision you would have to make.
The Moving Averages: This indicates the direction a trend is leaning towards. It is of great benefit for traders that are studying the nature of the market over a long period of time. Like any other option trading indicator, it must not be relied on alone but be used in combination with other indicators to get the best results.
The Bollinger Bands: This option trading indicator helps you to assess the volatility of the market. The measure of volatility is an indication to how much of an opportunity is available for you to take hold of. Again like earlier identified, this option trading indicator must be used in conjunction with other trading indicators to make perfect sense.
The Net Trader Positions: This may be looked upon as one of the greatest options trading indicator of all times. It checks up the measure of contrary trades and is calculated by the CFTC in a bi-weekly format. This is an effective tool in spotting opportunities that exist in options trading. You are able to predict major upcoming trends effectively when this options trading indicators are adequately deployed and understood.
The Stochastic Indicator: This option trading indicator was developed by the great George Lane. The idea behind it is that during a trend that is trending upward the prices would normally close within the range of the higher scale and the converse would occurs in a trend that is going in the opposite direction. This option trading indicator is by far one of the best that exist for creating profits in the options market.
The Relative Strength Index: Also known simply as the RSI, this options trading indicator tries to assess the strength of the current price in comparison with the past market conditions. It gives you a clear idea of what the future strength of the market would look like.
The Average Directional Movement: This option trading indicator is also simply known as the ADX. It calculates the strength of a trend as well as trying to assess how the market is performing. It helps to determine the strongest trends as well as give you early signs of a waning.