Conrad,
I wasn't trying to comment on the inner workings of AIM, only on how Ocroft utilizes AIM to determine his entry point.
As I understand the AIM process, when the price recovers enough to overcome the Residual Buy Advice, the Buy Advice is, at that point, Zero ($0.00). There is no need for a further increase in price to overcome the Min Buy because there IS no Buy Advice at all.
Remember, his system is based, first and foremost, on selecting the highest quality stocks so he can have some assurance that they will recover from what ever drop they have endured. He is looking to generate a gain of at least 20% on the transaction, and then he is moving on to another candidate. He is not holding a "core position" nor is he interested in holding the stock any longer than necessary to acheive the 20% gain. In this sense, he is not an AIM investor, but a trader who uses AIM for timing the stocks action.
STEP 1: Let's say, for example, that after the close of the market on the first trading day this month (July 2, 2012) he looks at the S&P list of A+ rated (Quality Rating) stocks and finds there are 40 stocks rated A+. He looks at each of these stocks on a chart and eliminates all that have not had a "high" within the past year and have since fallen from that point. That means all the eliminated stocks are either at their high or very near their high for the past year.
STEP 2: Now let's say there are 10 stocks that fit his critereon for an established "high" and a descent following. He then sets up a "Virtual" AIM for each of these at the high price, feeds the monthly (first close of the month) price into AIM for each month since the high, and , again, eliminates each stock that has not generated an AIM Buy Advice signal by that July 2 date. That means the price descent had to be great enough to get out of the AIM hold zone.
STEP 3: Now there are only three stocks remaining. He is still running the "Virtual AIM" he set up at that stock's high price. Each of these stocks would have generated Buy Advice in June, at least. One of these remaining stocks (ZYX) has generated Buy/Sell Advice of Zero ($0.00) on July 2, 2012, the other two have generated Buy Advice for July, so he will check them again on Aug 1st.
STEP 4: He now needs to make a decision about entering a trade with ZYX. Remember, it is presently Rated A+, even after a descent in price significant enough to get out of the AIM Hold Zone. If he decides to buy ZYX, he enters his order to purchase shares in a dollar amount equal to the total dollar amount in all the Buy Advice to date. He will generally be buying more shares than AIM would have purchased because he is buying at a lower price. He may decide not to purchase the stock, because there was only one Buy Advice incident and he didn't think the probabilities were there for his desired 20% gain, or for any other reason that seemed valid to him.
STEP 5: He finds the price at which his order was filled, multiplies that price by 1.2, and any time the current price (when he checks) exceeds that "Target" price, he sells all his shares. He then looks for another stock to run the same system on, using both the original funds plus the profit from this transaction (compounding).
I don't know, exactly, his procedure for a Selling decision. I know he has posted at least once that he would sell out if he had two consecutive Sell Advice periods and many times that he was looking for that 20%. I also assume he would be using "Average Price" to calculate the 20% gain if he had multiple buys. The idea in Step 5 is just the simplest method I could think of to acheive his 20% goal.
Sorry for such a long reply, but I believe that all the calculations and manipulations you are thinking about "within" AIM are of no consequence or importance to his process -- he is only using it as a "Timing Device".
Respectfully,
Bob
AI
