Ulcer Index

The Ulcer Index (UI) indicator can be used to determine downside risk by displaying the depth and duration of price declines from their earlier highs. A high UI value is generally an indication that the instrument's price has moved further away from its previous high and may take longer to return to this value.

Configuration Options

• Field: Price or combination of prices to use as the base for average calculations. Possible values include:
  • Open
  • High
  • Low
  • Close
  • Adjusted Close
  • HL/2 \( \left ( \frac{High + Low}{2} \right ) \)
  • HLC/3 \( \left ( \frac{High + Low + Close}{3} \right ) \)
  • HLCC/4 \( \left ( \frac{High + Low + Close + Close}{4} \right ) \)
  • OHLC/4 \( \left ( \frac{Open + High + Low + Close}{4} \right ) \)
• Period: Number of bars to use in the calculations.
• Color Selectors: Colors to use for graph elements.
• Display Axis Label: Whether to display the most recent value on the Y axis.

Formula

The indicator is calculated in three steps:

\[ Percentage\; Drawdown = \frac{Close - (n\text{-}period\; High\; Close)}{n\text{-}period\; High\; Close} \times 100 \]

\[ Squared\;Average = \frac{\sum_{n=1}^{n\text{-}period} (Percentage\;Drawdown)^2}{n\text{-}period} \]

\[ Ulcer\;Index = \sqrt{Squared\;Average} \]