What is the filter rule?

In finance and investing, the strategy filter rule is used to help investors in ensuring the purchase and sale of holding so that the transactions are made of the highest amount of profit. In most cases, the creation of this type of rule will focus on evaluating past trends concerning the unit price of each shares of shares. While some investors consider this basic method useful, detectives believe that the concept of the filter rules is of low value when deciding on investment.

While there are certain deviations in the way the financial filter rule can be created, the rule usually involves investigating changes in investment price for a certain period of time. The aim is to use changes in the price to identify an ongoing pattern, allowing you to determine when it would be the best time to buy or sell an investment. In the actual use of the investor creates an action point in which the possession will be purchased or sold, the usual unit price reaches a specific percentageit above or below the original purchase price used in the evaluation.

For example, the manual of the filter rules may be the adoption of measures when the unit price increases or decreases by ten percent. To purchase the filter rules, this means that the investor moves to the purchase of units or shares as soon as the stock or commodity begins to rise ascending, which exceeds ten percent of the price set as a standard. At the same time, the sale of the filter rules will take place, when holding in the portfolio will drop by more than ten percent below the unit price paid for obtaining shares.

Theoretically, the determination of the rule of this type would prevent the investor from losing a large amount of money for any share that began to fall down. At the same time, the rule would draw attention to the investor of an opportunity that shows the promise that I will increase considerably in the short ter TER because the rise has already begun. Using the rule on allHNY shares would then create a balance in the investment portfolio and maintained it more or less stable and less subject to devaluation due to too slowly with both type of transaction.

Detractors point out that in the real practice of the filter rule, these goals do not always achieve these goals. In fact, there are other indicators that would alert the investor to sell well before the share of the value of a certain fixed percentage. Relying on these several indicators instead of the rule based on one previous performance indicator in terms of price is likely to result in less loss and may completely eliminate the implementation of loss.

In a similar way, taking into account the wider range of indicators than is usually associated with the creation of the filter rule, they often allow the investor to purchase shares before increasing the value. This allows you to get more return, if the investor waited for the investment to reach a specific level of increase. Due to the limited extent of the rule, many brokers andHe considers other financial experts to be one of the less reliable ways to manage investment.