Ulcer Index

Creators: Peter Marin and Byron McCann

Default period: 10

This indicator was designed to analyse Mutual Funds.

The Ulcer Index is sometimes called a volatility indicator, but I would not call it that. It is primarily an indicator of drawdowns. The ulcer index measures the amount of drawdown that has occurred over a period of time. For bears, it serves as an entry indicator, while for bulls, it serves as an exit indicator.

This indicator illustrates how quickly the price has drifted away from its recent high.

The ulcer index measures the decline from the recent high. Therefore, when the price is high, the indicator will be zero. Indicators hover around zero when the price is trading near its high. When the price moves away from the recent high, the ulcer index increases in value. When the price reaches a new high, it falls. Simply put, a falling indicator indicates a bullish trend. A rising indicator indicates a bearish trend.

Whenever the Ulcer index indicator rises, it indicates a bearish trend.

A low Ulcer index reading indicates a bullish trend. Therefore, you can identify strong stocks by comparing Ulcer index values of different stocks.

It is a bearish sign that Ulcer index has spiked suddenly.

An effective strategy for analyzing Ulcer index is to apply the moving average. If the ulcer index rises above the moving average line, it is a bearish sign. It is bullish when the Ulcer index remains below the moving average.

Click here to learn more about the Ulcer index indicator.

The indicator can be found in the Indicator Digger section of TradePoint & RZone. There are ready conditions in tabular format that can be used to pick stocks based on the condition of this indicator on any charting technique.

The indicator table value in TradePoint & RZone also provides you with a list of all values of this indicator for any group of stocks. This will allow you to compare the readings of this indicator across different stocks.

This indicator is also available in the System Builder of RZone & TradePoint for all charting methods. Using the system builder, you can develop various strategies based on the different conditions already present in this indicator. Additionally, it can be used with other indicators or price patterns to develop effective trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.

The indicator is applicable to all types of charting. Calculated based on the number of columns on P&F charts, bricks on Renko charts, lines on Line-break charts, candles on Heikin ashi charts, and lines on Kagi charts. While the formula and reading of the indicators remain the same, they become more dynamic on these charts.