Futures trading sounds sexy until you buy the top or panic-sell the bottom. Then it just feels like regret with a leverage multiplier.
Whether you’re trading oil, gold, soybeans, or crypto futures, knowing whether a contract is at a high or low level is not just “nice to know”—it’s literally the difference between getting rich and getting rekt.
Let’s unpack how the pros (and street-smart underdogs) actually judge the price level of a futures product—without falling for the usual hype or hindsight bias.
🎢 First, a Hard Truth: Highs and Lows Are Only Obvious in Retrospect
You rarely know you’re at the top when you’re popping champagne. And nobody sends you a memo when it’s the bottom—only regret hits late.
So we don’t “predict” highs or lows. We assess probabilities based on clues the market leaves behind.
Here’s how to read those clues like a pro who’s been punched in the face enough times to know better.
🔍 1. Compare to Historical Price Range
The most basic but underrated method: zoom out.
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Plot a 1-year, 5-year, or even 10-year chart of the futures product.
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Look at where current prices sit relative to that long-term range.
If you're near all-time highs? It might be expensive.
Near multi-year lows? Might be cheap.
But wait—context matters.
🧠 2. Ask: “Why Are We Here?”
Prices don't just float. They move for reasons.
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Is crude oil high because of war and supply shocks? That could stick.
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Is wheat low because of a temporary surplus? That might reverse.
A high price backed by strong fundamentals is not overpriced. A low price with collapsing demand is not a bargain—it’s a warning.
Narrative matters. Always ask: What story is the market telling me?
📈 3. Use the “Basis” as a Clue
If you're trading commodity futures, the basis (difference between futures and spot prices) can reveal a lot.
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Positive basis (contango): Futures are more expensive than spot. Could imply oversupply.
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Negative basis (backwardation): Futures cheaper than spot. Could signal strong demand or scarcity.
This helps you sniff out whether the futures price is being distorted—or aligned with real-world pressure.
🧊 4. Volume + Open Interest = Market Temperature
High volume near a peak could mean a blow-off top… or a breakout.
But falling volume + rising price? That's weak sauce.
Rising volume + rising open interest + rising price? Momentum might just be starting.
Learning to read volume and open interest like emotional signals helps you catch whether the price is getting tired or gathering force.
🧮 5. Relative Strength Index (RSI) Isn’t Perfect—But It Works
Yes, it’s old-school. But RSI works shockingly well in futures markets.
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RSI above 70? Could be overbought.
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RSI below 30? Could be oversold.
Don't use it in isolation—but as part of your toolkit, it’s like a financial gut-check. Combine RSI with price structure and trend direction to sharpen your entries.
⚠️ 6. Everyone’s Bullish? Be Suspicious.
If CNBC, TikTok, and your Uber driver are screaming “Buy!”, the futures contract might be closer to a top than a breakout.
Sentiment extremes are where the market turns.
Use COT (Commitment of Traders) reports to see what the big players are doing. If small traders are going long and institutions are quietly shorting? That’s your cue.
🧘 7. Don’t Ask “Is It Cheap?”—Ask “What’s My Risk?”
Smart traders don’t care if the product is at a “low.”
They care if:
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The risk-reward is tilted in their favor
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They can define their stop-loss
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They can explain why now and not just why this asset
A “low” that keeps dropping isn’t a bargain—it’s a trap.
A “high” that keeps climbing isn’t a bubble—it’s a breakout.
You don’t need to predict the bottom. You just need to manage risk like your rent depends on it—because one day, it might.
💬 Final Thought: “Levels” Don’t Matter Unless You Have a Plan
The difference between a good trader and a gambler isn’t who guesses the high or low better. It’s who survives the guessing game long enough to win.
Don’t just ask if the price is high or low.
Ask: What am I doing if I’m wrong?
That’s where real confidence lives.
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