The Most Overlooked Technical Indicators That Pair Perfectly with Options

You’ve heard of RSI, MACD, and moving averages… but what about the tools no one’s talking about? Most options traders use the same handful of indicators—leading to crowded trades and missed signals. Learn how lesser-known but powerful indicators can offer a unique edge in timing options trades, spotting reversals, and managing risk. We are talking about indicators like Keltner Channels, Chaikin Money Flow, Donchian Channels, and several others. 

Are you confused yet? No worries—this guide will review each of the overlooked technical indicators in depth. 

Not only will you get a complete breakdown of these specific, underrated indicators, but we’ll also address how to pair them with options strategies for maximum effect. You don’t have to follow the crowd and use the same old technical indicators everyone else falls back on repeatedly. Don’t be an NPC—check out these overlooked indicators to take your trading sessions to the next level. 

Why Technical Indicators Matter in Options Trading

The entire point behind using technical indicators in options trading is to use historical price and volume data to find trends and patterns to predict the future price movements of the underlying asset that’s tied to the options contract you own. Before we get into the meat and potatoes of our guide on the relatively unknown technicals, let’s talk about why using these indicators matters to a great degree when trading options online. 

Combining indicators with options strategies is crucial when it comes to correctly timing your traders around market events and getting the direction right. Indicators are also useful in forecasting any kind of volatility that might be coming and taking advantage of these conditions with the right trading moves.

Common Pitfalls of Relying Only on Mainstream Indicators

Relying too heavily on mainstream technical indicators can pose problems for traders and investors. While they have their place and function, banking too much of your trading plan on these technicals can lead to undesirable results at times like misunderstanding the broader market context or getting false signals. We’ve outlined the common pitfalls below to give you a clear idea of the problems that come from overreliance. 

• False Signals—Technical indicators have a tendency to lag behind current market conditions because they’re rooted in historical data. Mainstream indicators can also generate false signals in volatile markets, which can lead many traders to enter or exit their trades at the wrong times based on unreliable data. 
• Ignoring Market Sentiment—Relying solely on the main technical indicators can lead some traders to ignore the complete market context. It’s critical for traders to also take other factors into account to base their trading decisions on such as market sentiment displayed by other traders, checking the news, and looking into market volatility. 
• Overreliance on Technicals—Traders can fall into a pattern of confirmation bias by using the common technicals that reinforce their opinions or beliefs. They make the bigger mistake of using only a single technique and using that to base their trading plan around, which is a recipe for disaster. It’s critical to include other factors to get the clearest idea of where the market could be going. 

The Criteria for “Overlooked” Indicators

Before we get into the topic of overlooked technical indicators, we need to talk about what qualifies these indicators as “overlooked.” What makes an indicator overlooked? The following factors contribute to the six indicators that we’ll talk about being overshadowed by others: 

• Low Usage—Some indicators are used less than others, which makes them “overlooked.” Some indicators have a more complex calculator which makes them less accessible to newcomers. Another reason for low usage is the fact that some aren’t as effective in predicting market movements as others, leading to them being used much less. 
• Misunderstood—Technical indicators can be misunderstood and, therefore, misapplied which can lead traders to using ineffective strategies. Some aren’t used as much as others because traders might overly rely on a single indicator and it’s usually one of the more mainstream indicators. Still, others may misunderstand market conditions and use indicators that might produce false signals. 
• Overshadowed by Mainstream Tools—Some indicators get a lot more love than others including the Relative Strength Index, Moving Average Convergence Divergence, Bollinger Bands, and Moving Averages. Some traders will focus on these four and call it a day, leaving the others to not be used as much as they could be. 

Some of the relatively unknown technical indicators may actually be better suited for options due to timing precision or volatility sensitivity. They are valuable in options trading due to them being able to capture or respond to factors like theta decay (time decay) or implied volatility leading into key market events like earnings announcements or new product rollouts. 

6 Overlooked Technical Indicators That Pair Well with Options

What are some of the best technical indicators that can be used in options strategies, but are often overlooked by traders and investors? We’ve got you covered—we have six overlooked technical indicators that can help out with timing your trades and getting confirmation of market trends for more clarity. 

Keltner Channels

Best Use Case: Identifying breakout setups for buying calls or puts

These are technical analysis tools that visually represent volatility with the underlying asset that’s tied to the options contract. Keltner Channels are important in helping traders identify the possible trends and breakouts with any stock or other asset being traded. 

There are two channel lines and a middle line, all of which are calculated based on the Average True Range. The current volatility is displayed by the distance between the channel lines from the middle line. Trends reversals or continuations can be spotted by the price action outside the channels. 

Different from Bollinger Bands

While Bollinger Bands and Keltner Channels are both volatility-based indicators, they’re different in the moving averages they use and how they measure volatility. Keltner Channels use an exponential moving average which works more dynamically than the simple moving average used with Bollinger Bands. The exponential moving average gives more weight to recent price data and is seen as more responsive to price changes. 

Chaikin Money Flow (CMF)

Best Use Case: Confirming momentum for directional strategies

A technical analysis indicator that gauges the strength of the buying or selling pressure on an asset over time, Chaikin Money Flow (CMF) helps traders or investors discover the flow of money into and out of the market. It measures a window of 20-21 days to get a positive or negative CMF reading.

• A CMF score above 0 indicates a potential uptrend (strong buying pressure)
• A CMF score below 0 indicates a potential downtrend (strong selling pressure) 

Chaikin Money Flow can also help trades to confirm trend direction, assess the strength of price movements, and detect potential reversals in price. 

Detrended Price Oscillator (DPO)

Best Use Case: Timing short-term options trades or credit spreads

Traders can use this technical analysis tool to pinpoint short-term price cycles and this is done by taking long-term trends out of the price data The oscillators compare the closing price to the moving average of the same data–the displacement highlights price movements’ cyclical tendencies which offers insights on overbought or oversold conditions. 

Average True Range (ATR) with Custom Filters

This technical analysis tool averages out the true range (or the greatest) of the current high minus the current low.

The True Range must be calculated for each period and once that is done, the Average True Range is calculated by averaging out the True Ranges over the specified number of periods. Higher ATRs indicate a higher rate of volatility in the market, while a lower ATR is symbolic of lower volatility. 

Though there’s a big emphasis on gauging market volatility using the Average True Range, there are a few other common uses that traders will find interesting. They include the following: 

• Position Sizing: ATR can help traders to figure out a proper position size for their investments. It’s based on the ATR’s assessment of market volatility. 
• Stop-Loss Placement: Find a way to adjust your stop-loss levels dynamically by using ATR during volatile periods. This technical indicator can keep you ahead of the volatile conditions coming down the pike. 
• Timing Premium Selling: Use ATR with thresholds to time premium selling for trading strategies like iron condors or straddles. 

Donchian Channels

This indicator can be used to find possible price breakouts or reversals and to visualize price volatility in the wider market context.

Similar to Bollinger Bands or Keltner Channels, Donchian Channels are made up of three lines: a middle line and, on either side, an upper band and a lower band.

• The upper band is the highest price reached within the period being studied.
• The lower band is the lower price reached within the period being studied.
• The middle band is used to determine the trend’s strength by taking an average of the upper and lower bands.

Donchian Channels can be used for trend identification where a widening channel could be a signal of increasing volatility. On the flip side, a narrowing channel could signal a trend reversal or a consolidation. Breakouts or trend continuations can be detected if the price closes outside of the channel. 

A few other handy signals that traders can pick up from Donchian Channels include the following:

• Volatility Gauge: The distance between the upper and lower bands can give traders a great idea of the measure of volatility in the market.
• Detecting Support and Resistance Levels: This indicator can detect these levels, in particular when the price is trading near the edge of the channel or right in the middle. 

Volume Profile / VWAP Anchored

Best Use Case: Identify institutional support/resistance levels for options entry zones

Focus on specific events or periods within an asset’s history to capture insights on liquidity and price action using the technical indicators of Anchoring Volume Profile and Volume Weighted Average Price. Each of them offers price-level-based insight, not just time-based. 

Volume Profile Anchored 

Traders can view the volume traded at each price level during certain periods of the asset’s history. It lets the trader see the price level with the most volume, the price ranges where the most volume concurred, and establish support or resistance levels based on historical volume activity. 

Volume Weighted Average Price 

This indicator figures out the average price of a given asset and it’s weighted by volume. It’s another useful technical indicator for finding support/resistance based on the average price weighted by volume. It can also be used for finding market reactions to certain events and can be used to assess the strength of a current trend.  

How to Pair These Indicators with Options Strategies

Some technical indicators pair better with certain options strategies than with others and we’ve outlined a few in the table here for your convenience. If you’re looking for a further elaboration of these pairings and what makes them work, continue reading below the chart for some further insights! 

Ideal Pairings

Hypothetical Real-World Examples 

• Keltner Channels With Long Calls—A sign of strong upward momentum in a trend can be seen when an asset’s price closes above the upper Keltner Channel. This situation is ideal for buying call options. A long call is preferable as the trader is betting on a further increase in the asset’s price. 
• Keltner Channels With Long Puts—Traders can spot a strong downward trend when the asset’s price closes below the Keltner Channel. Buying a long-put option is a good call if you’re anticipating the downward trend to last a significant period of time. 
• Chaikin Money Flow With Debit Spreads—The first step in this pairing is to determine if there’s a consistent uptrend in money flow which would justify the use of a bull debit spread. On the other hand, bearish trends in money flow would indicate that you should be using a bear debit spread. 
• Average True Range With Iron Condor—ATR can be used to gauge the potential range in the price movement of the underlying asset to get an idea of how the recent price volatility will inform the structure of the iron condor. ATR can be used to figure out the strikes for the condor to establish a profit zone that can account for any price fluctuations that could happen. 

Tips for Using Overlooked Indicators Effectively

To use these technical indicators effectively, it’s best to stick to some of these best practices for the best results. Prioritize risk management in your trading plan and keep things simple even though it seems like you should be using as many technical indicators as possible for the best view. Check out some of the best tips and tricks for leveraging these overlooked indicators to the best of your ability. 

• Don’t Stack Too Many—While we encourage delving into some of these unknown indicators, it’s still best to pick a few (anywhere from one to three) to inform your future strategy. If you begin incorporating too many, you run into the issue of data overload which can muddy the waters when a more simplistic, minimalistic approach is usually needed.  
• Always Combine with a Risk Management Rule—Whichever technical indicators you end up using, make sure that you’re placing a priority on risk management techniques like proper position size, diversified investments, and stop-loss levels to minimize your total losses over time. 
• Backtest Before Going Live—If you’re new to some of these technical indicators, it’s best to backtest your strategies to make sure they work and to also use demo accounts or paper trading when possible to practice with a virtual balance. It’s best to get into these practices before using your own money in a live market setting.
• Consider Timeframe Sensitivity: Think about the timeframe that some of these technical indicators work best in—some work best intraday and others on daily/weekly. Consider what kind of trader you are before choosing one of these indicators for your trading plan. Some might not work well for your plan, goals, or risk tolerance. 

Final Thoughts—Don’t Ignore These Hidden Indicators

If you’re interested in taking your options trading sessions to the next level, it’s time to begin looking into some of the more overlooked technical indicators beyond the Relative Strength Index or Moving Averages Convergence Divergence—there could be indicators that work better for your trading plan, but you might be unaware that they exist! This is why we’ve taken the time to talk about these forgotten technical indicators. 

Key Takeaways

• Most traders stick to the same basic indicators—leaving opportunities on the table.
• These overlooked tools can enhance timing, confidence, and strategy pairing.
• The best results come from aligning indicators with specific options trades.
• Always backtest and manage risk—no indicator is perfect.
• Try integrating just one of these indicators into your next setup and monitor the results.