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When an investor makes the decision to enter into option trading, the investor in turn has a wealth of information available to them to make the investment decisions in the market. A host of indicators, technical analysis, and any number of commentaries from investment professionals on Wall Street and beyond are there for the taking of their suggestions for your portfolio. However, the complexity of stock options trading is something that one should take into account when considering what advice or indicators to look at in making investment decisions.

To determine whether or not a stock price will travel above or below the strike price for a call or a put in the business of option trading, investors often use technical analysis, which involves not only past performance of the stock but analytical determinations as to what the future performance of the stock will be. While technical analysis and charts may be helpful to investors for many reasons; this type of analysis is often faulty and unreliable.

In accordance with the market's nature, attempting to nail down stock price moves by technically analyzing averages, volume changes, as well as other standards is, at best, an enormously dubious science. Due to the fact that both current and possible future events are not taken into consideration when it comes to the technical analysis aspect of option trading, in a sense, many of the working characteristics of technical analysis cannot be considered any more than witchery, on account of the fact that the underlying basis of the analysis tend to get quite foggy.

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 main weakness of the MACD indicator, as with other technically based investor tools, is the phenomenon known as whipsaw, which is very detrimental in option trading, as it entails the purchase of shares right before prices drop or the reverse of selling right before a price increase. Today's option traders use the MACD less as an indicator of potential actions, and more to guide them in their evaluation of successful marketing trading strategies.