Hi Sarmad,
Your question is the crux of the Aim-method. In essence an AIM does precisely what you propose. The difficulty is that a 10 % profit on a small portfolio invokes a high trading cost. It also depends what type of stock you are dealing with: for currency trading a 10% rise is a big move(very low trading costs). Supoose your stock exhibits a horizontal movement with + 10 % peaks and -10% dips. Then obviously you could adjust your buys and sells with large share-packages and this optimizes the trading. However, this approach goes beyond the ideas of AIM and falls under market pattern recognition. Anyone that recognizes a pattern can profit from it as long as the pattern lasts.
With the Lichello type AIM the essence is that your are blind to the market patterns and use a methodolgy to take advantage of the many market moves between the extremes that the market will exhibit. My interpretation is that a 10% market move is big enough, provided the portfolio is not too small. Consider that if you do sell 3 times on a 10% move...that is a jump of stock prices of 33%... that this is a large move and you did made a good profit. Waiting for a 33% profit may have resulted in market dip and then having missed the 10% rise would be frustrating. Depending on how much you sell at each 10% jump this means that a nice profit has been realised. If your sell packages have been too small you might have sufferd a loss due to high trading fees. What you call making a 10% profit on a few shares requires that these few shares must be larget than the minimum trading quantity(I call that a quantum)...the idea of a quantum derives of course from [b/quantum dynamics in which displacements and energies can not take place in quantities smaller than a quantum. I think that this analogy is perfect: AIM Trading "cannot" be smaller than a [b/quantum. Obviously the Minimum Buy/Sell Order is the same thing and you should make sure that you trade values are larger than that.
With regards to the dilemma of running out of shares if a big stock price rise occurrs this is precisely what AIM prevents. As the price rises you sell progressively less shares for the same QUANTUM that you sell(value of the Sell). This conserves the number of shares at a high stock price while you reap the profits.
On the big price drop that you metioned just after a 10% rise you have at least gained the 10%(if you sold some shares) profit from that and with that 10% profit you can possibly buy back 3 times as many shares in the dip. So my advice is that selling shares at 10 % proft is OK, as that is the intent of the AIM mehod...but watch the trading costs!!!
This does not fully remove your dilemma that it might be better to wait till a 30 or 50% rise in prices has ocurred. The point is that big market moves are very, very infrequent and taking advantage of the frequent oscillation that will build up the [b/share quantity in your portfolio is a much more effective method for portfolo growth...if the Big Move then hapens then your profits are bigger than with the Buy & Hold Method(B&H).
My motto is that that in any market an AIM cab beat the market systematically[b/]. This means that relative to an B&H strategy an AIM does better in all cases over a price cycle.
Conrad
