Filter rule-- A trading strategy !!

Filter rule is one of the trading strategies that benefit traders from the price movements of the stocks and fall under serial correlation strategy. A technical trading rule in which an investor buys and sells stocks if their price movement reverses direction by a minimally acceptable percentage.

Filter rules are created from analyzing the historical price trends of a security. The assumptions that is followed in this trading is that price changes are serially correlated and emerges from price momentum theory, i.e., stocks which have gone up strongly in the past are more likely to keep going up than go down.

So in conclusion, this strategy may work provided each time your bets are good. However, a good and justified way of making money from this strategy is through efficient money management. Remember, if you want to follow this strategy be prepared to get wiped off completely, and be ready with large amout of money. Evidence has suggested that filter rules are rarely successful in creating profits for the investor.