You can also access "external files" saved on iCloud Drive by other apps, or on Google Drive, Box, and others. But the process isn't as smooth: you cannot create files from Ulysses for iPad on these cloud services, only open files already there. And the app's biggest weakness is that it does not support Dropbox at all, even though the interface confusingly suggests that it does.
As far as entering text is concerned, Ulysses is one of the most efficient text editors I've used for iOS. It offers a useful button bar that gives you quick access to some basic Markdown tags and special characters. There's a counter button at the left of the ribbon, which expands to show words, characters, pages, and more (you can customize which counters to display). Ulysses for iPad also supports TextExpander snippets if you have that app installed. If you use a hardware keyboard with your iPad, you can also use a number of keyboard shortcuts to work more efficiently.
There are far too many features to cover in this review. Ulysses offers themes, tags, lets you make inline comments or notes, and you can share files or open them in other apps on your iPad. You can preview and export files in plain text, HTML, ePub, PDF or RTF (though the built-in preview window doesn't update in real time; you need to refresh that window for changes to be displayed).
Ulysses for iPad is a mature app that you can use on its own as a powerful Markdown or text editor, and it provides a complete writing environment. It's even more powerful if you use Ulysses for OS X. The ability to sync files between the two platforms allows you to write anywhere and stay up to date — when iCloud works. I'd be a lot more positive about this app if it worked with Dropbox, and I would think that, given Dropbox's popularity, a lot of users would prefer storing files there than on iCloud.
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