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In videos 40B and C, Al talks about how the highest bull close in a bull trend and the lowest bear close in a bear trend are important resistance and support because on a line chart those are the highs and lows and institutions use line charts. Why do they use line charts? Seems like a lot of information to be ignoring.
On that note, does anyone here trade on line charts?
Hi Garrett,
From what I understand about institutions, a large volume of their trading doesn't depend on price action or bar charts at all. Twiddling with tails and 5M charts is a very retail sort of thing. Institutions have to process very large orders from clients that ask them to get into certain markets at certain prices and they will receive bonuses the better they are at getting in at those prices. So they care more about levels and will enter at a level regardless of whether there is a bull or bear bar there or any sort of pattern. They simply need to get a lot of size into or out of the market at a specific price or better. So they might use VWAP and support/resistances and that's all they need for getting the prices their clients requested so line charts are all they'd need for that type of work. Of course this is just one example. The world of finance outside of retail trading is very very varied.
Hope that helped!
CH
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