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