High frequency trading: Has the market really changed?

The stock market has been around for centuries. Movement in stock market is influenced by the demand vs supply factor. The simple way to explain equity market is the aggregation of buyers and sellers of stocks. It represents a percentage of claims on businesses. These may include securities listed on a public stock exchange as well as stock that is only traded privately. Privately traded stocks include shares of private companies which are sold to an investor through trading platforms.

The Elliott Wave Theory was developed in the 1930s by Ralph Nelson Elliott. It was an analysis in greater depth of market behavior and how the patterns repeat itself. It is pretty simple when someone reads the Theory and understand the basic patterns. At the same time, it was an amazing discovery and has been applied as a strategy for millions of traders worldwide. The Theory’s main pattern states that the trend always moves in five waves. This is often referred to as an impulse which consists of five waves. The market will then pull back in three waves to correct the cycle and then continue in the direction of the five waves. For reference, please click on the following link to understand all the patterns within the Theory. It is a straightforward concept with three main rules and can provide a lot of profit if applied correctly. As we mentioned above, the Theory was developed in the 1930s, so our work has changed a lot. Even though the main factor of supply and demand still remains the same, market execution has changed. We need to imagine how hard it was 75 years ago to execute a trade and how few people across the planet could trade. Based on the first share owner census undertaken by the New York Stock Exchange (NYSE) in 1952, only 6.5 million Americans owned common stock. So this represents only 4.2% of the US population. Nowadays, according to Gallup, around 61% Americans own stocks. There is no question that technology has made it easier for traders to enter the Market. Personal computers and the Internet have opened a huge avenue to access the Market. More people trading means more daily volume and more money to be made overall.

Technology plays a huge role in our lives. From social media, internet, and business operations, everything has been affected by technology. It’s naive to believe that technology has not played a role in market execution and how the Human Factor has been taking it away from the simple Market Nature. In the past, a person bought stock through a bank or a broker and depending on the volume, the stock move in one direction or another. We have long suspected that computers have changed the market. High-Frequency Trading computers have made buying and selling very fast. We at EWF developed a system that aligns the old Elliott Wave Theory with the high-frequency trading of today’s Market. We analyzed the waves and the patterns and used the Theory as a language to get the sequences. The sequences allow traders to trade the right side. When the Market is correct, it is always moving in three, seven, and eleven in the simple sequences. We located the area and presented it to members as the Blue Box area.

Here are some examples of the Blue Boxes.

Tesla ($TSLA) corrects the Grand Super Cycle and trades lower since the peak in 2022 in a simple ABC or Three waves. We presented to members the Blue Box area, where our members will enter the Market. The blue box is where both buyers and sellers agree in a direction. The concept is simple, sellers push lower until the top of the Blue Box and using the Box to take profit. On the other hand, buyers wait to enter at the top of the blue box. Computers nowadays are the traders because it is impossible to trade every mini second.

Here is TESLA Weekly Chart showing the Buying area.

$TSLA weekly Elliott Wave chart

Here is Tesla showing the reaction from the blue box area:

Another example is $SPY, which has been trending higher within the cycle since 10.13.2022 and the shorter cycle since 03.2023. The Index pullback in three waves within the impulse in wave iv. Our members know the blue box area which is the high-frequency trading area.

Here is SPY presented to members on 06.08.2023, expecting the Instrument to reach the High- Frequency Trading area.

$SPY 1 hour Elliott Wave chart

Here is SPY reacting off the blue box High-Frequency Trading area. The Index reacted higher in wave ii and wave iv.

Another example is Gold, which corrected the cycle in the weekly chart and made a simple ABC pullback. The metal was targeting the blue box area, where buyers were waiting.

Here is the Weekly chart showing the expected blue box area.

Gold ($XAU/USD) weekly Elliott Wave

Here is the latest Weekly chart showing the tremendous reaction off the blue box area.

In conclusion, the Market has changed over years and computers have changed the way trading operates. The market has turned into very defined areas. Those areas are defined ahead of time, and the moment the connector within the correction happens, the areas present itself. At that moment, the corrective side keeps pushing into the box, and the right side waits at the box and enters the Market.

We want to make it clear that reaching the Blue Box does not mean a winning trade. It means that a reaction should happen because when market corrects, it moves in three, seven, and eleven swing. The Boxes sometimes create a reaction after three waves, then push for the seven. But as far as the main cycle pivot hold, always enter with the right side in three, seven, and eleven, which means having the High-Frequency Trading in your side.