The decision to enter into the universe of Option Trading is an important one: these days, investors have a vast array of information in regards to options available so they can make informed decisions. Indicators, commentaries from Wall Street professionals as well as market indicators are available to the average investor. Still, like the game of Craps, the down-side is that stock options trading can be complex and unpredictable, so investors should tread lightly when considering advice or indicators when investment decisions are made.

In option trading, the average investor will use technical analysis in trying to make the determination as to whether or not the price of a stock will go above or below the strike price for their call or put. Technical analysis involves the using only past performance data in various charts to make the analytical determinations of what the future price moves of a stock are. Often, technical analysis provides positive results for a host of reasons, but is often unreliable.

Attempting to nail down stock price moves founded upon the technical analysis of averages, volume changes and other indicators can be tricky due to the characteristic rise and fall of the market. In option trading, any facet of the technical analysis is principally a guessing game as the definitions get foggier for the reason that present and future events are not calculated into the analysis.

Alternatively, many investors are looking to other indicator and indicator-based tools of analysis when looking for help making decisions in the options market. Since indicators take a good overall diagnosis of the market, combining both analysis of current market situations with guidance for future market movement, they are a much better way of analyzing future trends since they take both past and future in to consideration in their diagnosis.

Of these tools for option trading investors, the most useful is the MACD indicator. MACD stands for Moving Average Convergence and Divergence, and is an indicator of a company's 50 day moving average as compared to their 200 day moving average, with an analysis taken of the difference between them. Today this tool is used mainly for observation purposes, but it was used in the past as a much stronger tool for analysis.

The weakness of the MACD indicator, as with many technically based tools, is that the tool was prone to a phenomenon called whipsaw, which is very counterproductive in option trading, as it involves the buying of shares before a drop in prices or selling before a rise. Option traders today use this indicator less as a measure of what they should do, and more as a guiding tool to help them evaluate the market for successful trading.