Ulcer Index — what it is and how to use it in trading
Definition
The Ulcer Index is a risk indicator measuring not price dispersion around an average (like Std Dev), but specifically the depth and duration of drawdowns from a recent high over period candles: a long, deep drawdown produces a high reading, even if overall volatility is otherwise modest.
How it works in the builder
The ulcer_index operand takes a period parameter (default 14) and returns a positive percentage value — unlike ATR or Std Dev, which are expressed in price units, the Ulcer Index reading is comparable across instruments of very different price scale.
What it looks like on the chart
Drawn as a separate panel with the area under the line filled down to a zero baseline — the shaded area visually shows the "depth" of the current drawdown, not just the line's height.
Typical use
Used as a risk filter rather than an entry signal — for example, avoiding new positions while ulcer_index(14) is above a calibrated threshold, since the market is in the middle of a prolonged drawdown at that point.
Common pitfalls
By construction, the Ulcer Index only reacts to drawdowns from a local high and says nothing about the volatility of a rising market with no drawdowns — it is a complementary, not a replacement, risk measure relative to ATR or Std Dev.
This block is available in the strategy builder
137 no-code blocks — build an entry condition with this term and test it on history
Historical results do not guarantee future ones. The service is an informational and analytical tool, not an individual investment recommendation; trades are not executed.