Roger Federer said his dramatic defeat against Novak Djokovic in the final of the ATP Tour Finals was the kind of epic showdown that stops him from thinking about retiring.

Federer's two-year reign as Tour Finals champion was brought to an end by a brilliant display from Djokovic, who underlined his status as the world No 1 by taking everything the Swiss great could throw at him and then hitting back even harder.

Djokovic eventually won 7-6 (6), 7-5 after 2 hours and 14 minutes of enthralling action at London's O2 Arena on Monday, denying Federer the chance to add to his six Tour Finals titles and leading the 31-year-old to acknowledge the thrill he gets from going toe to toe with such a spirited rival.

"It's part of the puzzle that makes me motivated, trying to play against the likes of Novak, Andy (Murray) and Rafa (Nadal)," Federer said.

"I think we had some great stuff out there. It was good playing such points.

"It's great playing against these guys because the ball does come back a few more times than against other players and you get those great rallies going.

"I love playing against the young guys as well, because to many of them I'm an idol, which is kind of strange to me. But it's nice seeing them grow, see what the next generation comes up with."

Federer admitted he was frustrated to let the title slip through his fingers after leading by a break in each set.

But the 17-time Grand Slam champion acknowledged Djokovic had come up with some superb shots at the key moments.

"Maybe I have a bit of regret because I had the lead twice first before him," Federer said.

"But at the end of the day, that doesn't matter. You have to get over the finish line in the set and then obviously at the end of the match. He was better at that today.

"You have to talk about me serving really fast three or four times and him bringing back a bullet. I think this is where he gets me on the back foot."

Although Federer's 2012 campaign ended on a low note, a season that includes winning Wimbledon for the seventh time, as well as taking a silver medal at the London Olympics, can't be regarded as a failure, and the Swiss is already plotting how to add more silverware to his trophy cabinet next year.

"I reflect in a nice way. I think it's been a fantastic season to be part of," Federer said.

"I'm very pleased that I was able to pick up my performance at the end of the season, like I played now this week. So obviously that gives me confidence for next year. I haven't really set clear goals yet for next year. I first have to make sure I create my schedule so it makes sense.

"I need to practice a whole lot more next year because this year I hardly did have an opportunity to do so. I have some catching up to do from that standpoint."