Ulcer Index Indicator Explained

Peter Martin's Ulcer Index (UI) measures risk the way traders actually feel it: as drawdown. It root-mean-squares the percentage drops from recent highs over the window — deep or long underwater stretches score high; steady advances score near zero, however volatile the up-moves.

How It Works

• Each bar's percentage drawdown from the window's running high is squared and averaged.
• Only downside counts: upside volatility doesn't inflate the score.
• Higher UI = deeper/longer recent pain.

How to Trade It

Use UI to choose what to trade: among a basket, symbols with low UI trend cleanly and suit trend systems. As a portfolio guard, a rising UI on your equity curve (computable in the Indicators Lab) is a principled trigger for cutting size.

Building It in Setup.Cash

Add Ulcer Index in the strategy builder — the length input controls its sensitivity — and use its value in any entry, exit, or filter condition. You can also combine it with other tools in the Indicators Lab or via the AI indicator generator. See the backtest metrics guide for drawdown context. For the full category overview, see the volatility & statistics library guide.

Volatility indicators qualify trades rather than generate them — backtest your system with and without this filter and compare the drawdowns.