Ulcer index = root-mean-square of percent drawdowns from running highs over a window. Mechanically, you compute the drawdown at every point, square it, average, and take the square root. The result is in percent and behaves like a 'volatility of drawdowns.'
The name comes from its inventor Peter Martin, who built it to capture the psychological cost of holding a position through extended underperformance. A 30% one-day drop and a 30% slow-grind drawdown over six months hurt the same in absolute terms but feel completely different — and the slow grind kills more strategies because traders abandon them mid-recovery.
Sharpe and Sortino reduce risk to a single volatility number. Both miss the duration component. A strategy with low volatility but a long, shallow, persistent drawdown will look fine on Sharpe and disastrous on ulcer index — which is the more honest read when you're the one living through it day by day.
Used in tandem with Calmar (depth-only) and recovery factor (round-trip), ulcer index closes the picture on drawdown quality. The trio answers: how deep, how long, and how fast back. Most traders only ever look at the depth number, then wonder why their strategies psychologically broke them at half the max drawdown the backtest said they could tolerate. Duration is the missing variable.