Use Momentum as an Indicator in Futures Trading

• When the RSI falls below 30, the underlying is considered oversold (trading well below its recent average price)
• When the RSI is above 70, the underlying is considered overbought (trading well above its recent average price)
• Extreme levels may suggest that a trend is over-extended and the price trend might be exhausted or may even reverse. 

Since the RSI has the same value scale regardless of the traded instrument’s price, you can compare RSI values across multiple futures markets to get a sense of which are overbought or oversold.

The Stochastics indicator includes two lines:

• The %K line is calculated by taking the difference of current price and the Low over the lookback period, then dividing by the difference of the highest high and lowest low over the same period.
• The %D line is a smoothed %K line which reflects a simple moving average of the %K line (usually a 3-period average)

Similar to the RSI, Stochastics is also a bounded study with a scale of 0 to 100. 

• During a market downtrend, the Stochastic value will become more oversold (i.e. less than 20)
• During a market uptrend, the Stochastic value will become more overbought (i.e. greater than 80)
• When the %K line crosses the %D line, this may signal a potential directional change which can be a stronger signal when these lines are in overbought or oversold territory