I'm try to configure the incident rules for 1 of my windows service to alert me in email whenever there is any error in the application.
I have attached my configuration where I have set my threholds to 1 to test if Dynatrace able to trigger email to me, but it doesn't trigger email when I have database connection issue.
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In AppMon, we have the following PurePath classifications (as indicated by the coloured bullet point):
When you're tracking the "Failed transaction count" of something, you're only looking at those PurePaths in red which have failed to complete. From what I see in your screenshot, the PurePath you're showing has executed despite the failure to acquire a connection to the database for that specific method, hence your failed transaction count is still 0.
A more accurate count of errors is given by the measure "Exceptions - count", but this is tricky when used in the context of an incident as it can give a lot of false positives. You can always create your own measures for tracking specific errors, and that can give a better understanding if something important is happening within your PurePaths.
Hope this helps,