@ Howard Investor,
. . . .after I make the above move I get another buy stock signal even if the stock price is the same. .
You have hit on an issue that every now and then pops up again as people get to know the AIM system. It is a very valid observation. More than that! If you execute your very first buy, after setting up your AIM Portfolio, and wait a month or two months or 6 months for checking the Trade Advice, and the price is again the same as before, then you will get the same Residual Buy Signal as you get right after having made you first buy. This is because that he AIM Buy Signal is driven by stock price difference.
This effect is quite peculiar. For any trading system one would expect that a Trade Advice should be optimum and that just after you have bought stock the Trade Advice should be 0 and only when the stock price changes should a Trade Advice appear. One can conclude that if you get Residual Buy Signal then the original Buy Signal was not an Optimum Buy Signal.
Apart from anything else, a Residual Buy Signal, if carried out, will increase the trading costs for the amount of shares bought at the original price. . logic demand the conclusion that the sum of all the Residual Buys you get within the Minimum Buy Amount should be bought in one lump and thereafter the Buy Advice should be 0. This way you would not waste money on trading costs for multiple buys at the same price.
Many years ago I started trading the AIM-Way and immediately discovered this flaw and I gave it the name The Lichello Flaw and I modified the AIM Trade Advice Generator after a rather interesting mathematical analysis, by which The Trade Advice could also be adjusted so that the first trade would be the right trade that was optimum for the type of investing style one preferred. . conservative, giving a small buy signal. . .or aggressive, giving a large buy signal. Likewise this also was made to function that way for the selling side but with a different adjustment factor if needed.
In those years very deep going discussions on The Flaw where held on this forum. Some people agreed with me but others stated that it was not so much as “flaw” but rather a “feature” that could be dealt with by [I]ignoring[/I] it and only executing a trade IF the stock price changed by a certain amount.
Steve is also more or less correct that the Flaw can be dealt with by executing the residual buys. . .the “feature” mentioned above would stop the buying before great harm would be done because the Residual Buys get smaller and smaller if executed, and then the Minimum Buy Amount would kick in to stop the potential harmful buying.
I do not agree with this: one would have accrued extra trading costs unnecessarily AND if one did not execute the residual buys one would have bought too few shares, or at least might feel they did.
My adoption of AIM (Vortex AIM) functions slightly different than regular AIM in that it is symmetric with respect to buying and selling(A Ratio Trading System). . .regular AIM is not(An Offset Trading System). These differences are interesting and AIM-ers can live with the Residual Buy “feature” . The Vortex AIM system has it advantages too. . mostly a great flexibility to make the trading aggressive for low volatility funds and trading conservatively for risky funds. Vortex AIM can even be set to a Buy & Hold strategy simply by setting the trading parameters at specific values!
If one seeks an AIM-derivative trading system that sets the Trade Advice to 0 after each trade one might like the features of Vortex AIM a lot!
If you want to dig into the Lichello Flaw discussion from years ago then simply search this forum on “Lichello Flaw”.
