What is Fine Tuning?

In professional finance, fine tuning often refers to the process of making small modifications and improvements to investing strategy. In recent years the rise of algorithmic trading and quantitative investing has given the notion of fine tuning new dimensions. Trading or investing system developers work to improve and optimize returns by improved coding and upgraded hardware systems. High-frequency traders have even developed purpose-built microchips with algorithms embedded in the hardware for faster processing. Regardless of the technology, fine tuning seeks to increase the efficiency of algorithmic processes or functions.

Key Takeaways

  • Fine tuning includes looking at the rules for allocating investment money and when to make changes to the allocations.
  • It also includes improvements to the coding of algorithmic-based strategies.
  • Markets are constantly shifting, and coding changes are needed for those who want to secure their edge.

Understanding Fine Tuning

Fine tuning can be accomplished a variety of ways. The methodology depends on the process being optimized. Fine tuning is used in investing plans and research studies across a variety of industries. Researchers may fine tune studies and theories for years before publishing or receiving credit for their work. Nowadays they often collaborate with talented coders to turn their theories into calculable models and investing or trading algorithms.

Another form of fine tuning is not associated with coding or electronic algorithms, but is known In the investment industry as strategic investment fine tuning. Investors can fine tune their investing plans in many ways in order to optimize their returns, even if the implementation of those plans is manual in nature.

Coding Technology

Advances in coding practice and technology trigger fine-tuning research among algorithmic developers. Developments around the use of fine tuning in fuzzy logic-based, artificial-intelligence, neural-network, or genetic algorithms, provide a few examples of areas which may trigger a desire for fine tuning in algorithmic development. With the rise of algorithmic and high-frequency trading, these technological updates are increasingly desirable.

Investing and Trading

The investment industry offers a vast universe of investing options, theories, products and trading strategies that can be used to optimize results. Professional investment managers are constantly fine tuning their economic, quantitative and fundamental models for optimal results.

Long term individual investors will typically seek the services of professional investment managers to help them in fine tuning their investment portfolios. These services may include consultation from a financial advisor or investing through managed accounts and managed funds. Generally, working with a financial advisor can be one of the best ways to make sure that an investment portfolio is actively fine-tuned through all types of market environments.

Active trading and technical analysis also provide a great deal of opportunity for fine tuning. Active traders can fine tune their investing strategies by broadening the types of orders they use. Technical analysts using a variety of trading strategies can also fine tune their trading plans by identifying and using new technical analysis patterns or more comprehensively combining technical analysis patterns systematically to create stronger conviction around trading signals.

While a number of fine tuning opportunities exist in the investment market, several theories also support the benefits of maintaining conservative investment positions. Diversification and the efficient market theory suggest that investors should be acutely aware of their risk tolerances for optimal investing across a range of assets.