Decoding neural signals into control outputs has been a key to the development of brain-computer interfaces (BCIs). While many studies have identified neural correlates of kinematics or applied advanced machine learning algorithms to improve decoding performance, relatively less attention has been paid to optimal design of decoding models. For generating continuous movements from neural activity, design of decoding models should address how to incorporate movement dynamics into models and how to select a model given specific BCI objectives. Considering nonlinear and independent speed characteristics, we propose a hybrid Kalman filter to decode the hand direction and speed independently. We also investigate changes in performance of different decoding models (the linear and Kalman filters) when they predict reaching movements only or predict both reach and rest. Our offline study on human magnetoencephalography (MEG) during point-to-point arm movements shows that the performance of the linear filter or the Kalman filter is affected by including resting states for training and predicting movements. However, the hybrid Kalman filter consistently outperforms others regardless of movement states. The results demonstrate that better design of decoding models is achieved by incorporating movement dynamics into modeling or selecting a model according to decoding objectives.