Cheerful factor

The Fröhlich factor ( FF ) - named after Stefan Fröhlich - is a key figure used to measure the performance of (automatic) trading systems in backtesting .

formula

The formula for calculating the Fröhlich factor is:

${\displaystyle FF={\frac {NettoProfit\cdot PercentWinningTrades\cdot (ProfitFactor+(AverageWin/AverageLoss))}{Max.WinningTrade+Max.LoosingTrade+Max.Drawdown}}}$

Net profit is the profit generated in the trading period under consideration, Percent Winning Trades indicates the proportion of trades that could be concluded with a profit, Profit Factor is the ratio of trades with profit to those with loss. Average Win and Average Loss indicate the average profit or loss per trade. Max. Winning Trade and Max. Loosing Trade are used below the fraction line in order to eliminate distortions in the result and the Max. Drawdown , ie the greatest loss during the observation period, is taken into account.

use

The Fröhlich factor is often stated in the performance report for a trading system.

According to Stefan Fröhlich, the FF should be at least 5 for intraday systems and at least 10 for EOD systems. A reading above 30 should be viewed critically, because this a overfitting (English. Overfitting ) and may indicate a trading system then has a lower quality in real conditions.

literature

• Tradesignal Handbook for Version 7.0, p. 204.
• Tradesignal Online Terminal
• Harald Ruppert: Happy factor. Seal of approval for trading systems. In: boerse.de , August 30, 2010.

Individual evidence

1. ↑ ^{a b c} Harald Ruppert: Fröhlich factor. Seal of approval for trading systems. In: boerse.de , August 30, 2010, accessed on February 13, 2017