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Ulcer Index

Developed by Peter Martin and Byron McCann, is a volatility indicator measures downside (draw-down) risks.

  • Mostly used on ETF's.
  • Works best on Weekly Charts
  • Suggest to overlay 52 week simple moving average on the Ulcer Index.
  • When UI is above its average it's Bearish.
  • When UI is in uptrend it's near 0
  • UI value (displayed in percentage) tells you the downside or draw-down that could be expected.
  • Used to compare draw-down risk to peers.

Ulcer Index formula:

% Drawdown= ((Close - 14-period Max Close)/14-period Max Close) x 100
Squared Average = (14-perod Sum of % Drawdown Squared)/14
Ulcer Index = Square Root of Squared Average

 

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