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That headroom is the dynamic "space" allowing equalizer/tone amplification (esp. basses) without going over digital 0dB (=maximum signal level). Modern music is usually compressed well enough so there is almost no spare dynamic range you can use to amplify signal into.

By applying negative gain (in Poweramp - via Preamp and/or headroom gain option) you're allowing more equalization/tone control - in cases with the DVC disabled.

If DVC is enabled, Poweramp uses full dynamic range allowed by the device output so no negative gains are needed on low to moderate volume levels, but still if you're listening on the volume levels close to the maximum (you really shouldn't), you may need extra negative headroom for high bass gain without going over digital 0dB and overloading (or hitting limiter).

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https://forum.powerampapp.com/topic/26022-headroom-gain/#findComment-120274
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