Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Find a Job
  • Home
  • Economics, Finance, & Analytics
  • Investments, Trading, and Financial Markets

Filter Rule - Explained

What is the Filter Rule?

Written by Jason Gordon

Updated at April 17th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is the Filter Rule?How Does the Filter Rule Work?Filter Rule ParametersFilter Rule Implementations

What is the Filter Rule?

A filter rule refers to a trading strategy devised by technical analysts to guide the investment patterns of investors and help them make the most favorable investment decisions. A filter rule is a technical analysis rule that is set based on the changes in the prices of commodities, especially from lows to highs. Hence, in a filter rule, an arbitrary percentage change in stock prices serve as an indicator for the appropriate time to sell or buy stock in the market. A filter rule is, therefore, a rule set to guide investors based on the interpretation of market or technical analysts about a stocks price history.

Back to:INVESTMENTS & TRADING

How Does the Filter Rule Work?

The filter rule is set based on the price momentum in the market, the rise and fall of the price is an indicator of the best time to buy and sell stock in the market. This rule analyses the historical price of a security with the aim of using the price trends to arrive at the most favorable buying and selling patterns for investors. A filter rule is a good approach that helps investors make profits from percentage changes in the prices of securities. For instance, if an analyst sets his filter rule at 10%, if a stocks price rises to 10%, such analysts will recommend buying and if it falls 10%, selling will be recommended.

Filter Rule Parameters

Generally, technical analysts set their filter rules using the historical patterns and trends of prices of stock, as well as their discretion. This is to say that different analysts can develop different filter rules. Traders use varieties of filter rules to make decisions regarding the appropriate time to buy or sell securities. Traders also filter trading orders based on certain notable price patterns and trends in the investment market. Filter rules have different percentages as used in trading, according to a study, lower filter percentages record more successes than filters with higher percentages.

Filter Rule Implementations

To implement filter rule, there is a specific software required, this software is used by technical analysts to create filter rules. Software systems used for trading analysis can be designed in a way that they provide a signal when it is appropriate to buy or sell or automated to execute the trade. While some traders opt for automated software systems, others prefer software systems that provide alerts for trading.

filter rule

Was this article helpful?

Yes
No

Related Articles

  • Dark Pool - Explained
  • Average Annual Return - Explained
  • Face Value (Securities) - Explained
  • Income Deposit Security - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand