Pain Index

Mean absolute dollar distance below the P&L peak — linear measure of drawdown pain in account currency.

Computed from: Equity curve
Scope: Single report
Range: ≥ 0
Direction: Lower is better

The Pain Index is the chronic ache of being below your best, distilled to one number: how far below its peak the account sat on an average day. Where max drawdown reports the one-time shock of the single worst hole, the Pain Index averages every dip — deep and shallow alike — across the whole record. (See the shaded "underwater" area in the chart below.)

How it's calculated

At every point, measure how far the P&L curve sits below its running high-water mark — that distance is the drawdown. The Pain Index is simply the average of all those distances.

Pain Index = average( peak − P&L )

peak(t): the highest P&L the account has reached up to time t (the high-water mark)
peak − P&L: the drawdown at time t — distance below that peak, in dollars (≥ 0)
average( · ): the plain arithmetic average of that drawdown over every point in the record

In this product: It is the average of the drawdown series (the list of distance-below-peak at every point), in account currency (dollars) — not a percentage. EquityTruth computes it on the P&L curve only. It reads the same distance-below-peak series as max drawdown and the Ulcer Index, but averages it linearly instead of taking the single worst point (max drawdown) or the deep-dip-weighted average (Ulcer).

The gap between the curve and its high-water mark (100) is the drawdown. Max drawdown is the deepest point of the shaded water; the Pain Index is its average depth.

What it tells you

The Pain Index comes out in dollars, so a raw figure means nothing until you size it against the account. To use the bands below, convert it to a percentage — divide the Pain Index by the account's peak balance and multiply by 100. (Example: a $50 Pain Index on a $1,000 peak = 5%, which lands in the "Notable" band.) Leveraged retail forex runs hotter, so read the band relative to leverage, never alone.

Value	Reading	Notes
< 1%	Very smooth	Almost always at or near its peak.
1 – 3%	Mild	Normal shallow underwater stretches.
3 – 6%	Notable	Spends real time meaningfully below the peak.
> 6%	Severe	Chronically deep underwater on average.

On the same P&L curve, the Pain Index can never exceed the dollar max drawdown (the deepest single fall, in dollars) — an average can't beat its own largest value. That's the one clean ordering you can read straight off the dollar figures.

Worked example

Take a single drawdown series of 0, −5, −10, −5, 0 over five points — the same series used in the Ulcer Index example. Summarized three ways:

Pain (average)  = (0+5+10+5+0)/5         = 4
Ulcer (RMS)     = √((0+25+100+25+0)/5)   ≈ 5.5
Max Drawdown    = worst single point     = 10

For one series in one unit, the three summaries always fall in the order average ≤ RMS ≤ max, so here Pain ≤ Ulcer ≤ Max Drawdown. The Pain Index treats the one −10 in proportion to the −5s; the Ulcer Index lets it dominate; max drawdown sees only the −10.

That ordering is a fact about the math, not about EquityTruth's three dashboard numbers. The live Pain Index is in dollars on the P&L curve, while the live Ulcer Index and the headline max drawdown are in percent on the Return curve — different curves, different units. So the figures you actually see will not line up as 4 ≤ 5.5 ≤ 10, and you can't compare a dollar Pain Index against a percent Ulcer. The only same-unit comparison is Pain Index ≤ the dollar (P&L) max drawdown.

Pitfalls

Pitfalls & caveats

It's linear — deep holes don't dominate. A few dangerous deep drawdowns get averaged in alongside many shallow ones, so the Pain Index can look benign while a serious deep hole hides in the average. When you want depth weighted more heavily, use the Ulcer Index.
Dollars, not percent — and not comparable across accounts. Because it lives on the P&L curve, the Pain Index scales with position size. A $500 Pain Index on a $5,000 account is far worse than the same $500 on a $500,000 account. Always size it against the account before judging.
Needs the whole series. It averages over every point, so a short history under-samples drawdowns and can read deceptively low — check the record's account age.
An unfinished drawdown keeps it high. An account still below its peak at the end of the record carries elevated Pain that won't fall until equity climbs back.

Pain Index vs Ulcer vs Max Drawdown

The three lenses summarize the same underwater history differently — but mind the units. Max drawdown is the worst single point. The Pain Index is the average depth — every dip counted in proportion. The Ulcer Index is the RMS (root-mean-square — a deep-dip-weighted average), the same series squared before averaging so deep drawdowns weigh more. As pure operators on one series, average ≤ RMS ≤ max. But in EquityTruth they are not interchangeable readings: Pain is dollars on the P&L curve; Ulcer and the headline max drawdown are percent on the Return curve. Read each for what it is — Pain flags accounts chronically, mildly underwater; Ulcer flags occasional deep holes; max drawdown flags the one worst hole.

Ulcer index — the RMS (rather than average) drawdown depth, weighting deep drops more.
Max drawdown — the single worst peak-to-valley fall.
Time under water — how long equity stayed below its high-water mark.

Related metrics

Compare withUlcer Index