Fano Factor

Fano Factor is a measure of the dispersion of the probability distribution of Fano noise, named after Ugo Fano, an Italian-American Physicist. Fans has applications in Particle Detection and Neuroscience for describing variability in complex multivariate data. In trading, we have discovered Fano can be used as a 'signal to noise' ratio, and can indicate the strength of price movements (i.e., price movement is greater than predicted by purely statistical measures). Like standard deviation, Fano Factor values are relative, not oscillatory or absolute.

Trading strategy (please see screenshots below):

• Enter in the direction of a price movement, and make note of the entry Fano Factor value
• Increasing Fano Factor indicates increased robustness of price movement
• Decreasing Fano Factor value indicates the price movement may be losing strength
• Exit trade when Fano Factor is at or above the entry FF value
• Risk-adverse traders may exit when FF first decreases from a peak. Risk-prone traders may remain in the trade until FF is at or above the entry FF value, in order to capture more of the price movement

Indicator values

• Signal length (Default=14): number of bars for calculation