In order to predict the future direction of the market, technical analysis based on options volume is a very powerful tool. Options volume analysis is critical for anyone who wants to predict financial market movements and build a successful Options Trading System. From one side technical analysis is not an exact science and you may hear it from many investors, especially from those who are involved in fundamental analysis. On the other hand, when it comes to an attempt to predict a possible future price trend, none of type analysis would give you 100% guarantee. Even when you come to well respected bank, a registered investment advisor will ask you to sign a waiver that whatever you promised is not guaranteed....
Technical analysis takes a considerable amount of experience. Not all technical studies work the same for every security traded. What works for one stock may not work for the same stock options. What works for one stock may not be a good idea to use with another stock or ETF. One indicator may give good buy and sell signals while another indicator may not work for whatever you trade at all. It's a personal choice of each individual trader to find those indicators and strategy that will fit his or her specific trading needs.
The professional investor that looks at the same stocks and only buys when there is a SALE going on doesn't have to care about analysts or market hype. So when everyone has given up and sold, he is buying. After a month or two the stock generally rebounds and Wall Street loves the stock again, then analysts hop on board and upgrade the stock to a strong buy, raising estimates and new fools come in and buy the stock at the all time high. The professional investor then dumps his stock and looks to find the next stock that is still at a bargain price.
As price is always a function of volume. Options technical analysis needn't always focus on the price. Options volume technical analysis centers on the volume of ALL contracts traded for a particular security, not just around the volume of any particular contract. This system provides a precise picture of the market and direction. By doing the options volume analysis in the form of a chart and through the analysis of the chart's behavior, the future direction of the market and market reversals can be predicted.
This trading system has a level of subjectivity because it is not 100% mechanical. System of volume technical analysis is the basic technology behind this Options Trading System. This system also incorporates other forms of technical analysis.
The importance of index charts and index indicators is known to every options trader and options analyst, but that is not the whole picture. What sets our analysts apart from the "traditional" technical analyst, is that they concentrate on the collective volume for all options. "Fundamental Options Volume Analysis" is a good term for the type of technical analysis behind our Options Trading System, where we analyze the CAUSE of the price movements, instead of just analyzing the resulting price.
Naked options trading is very risky - many people lose money trading them. It is recommended contacting your broker or investment professional to find out about trading risk and margin requirements before getting involved into trading uncovered options.