What is a worked example of Price Alerts?
A worked example of price alerts is a step-by-step numerical scenario that shows exactly what input you choose (the alert level and condition), what price you assume is observed, and whether the alert would trigger. It also states the assumptions that make the result verifiable, such as how “reaches” is defined (touch vs. cross), when the quote is sampled (continuous vs. at checks), and whether you assume zero costs.
This article uses a generic, non-market-specific example. It does not assume live prices, a particular platform, or any guaranteed outcome.
How does a worked example of Price Alerts work?
A price alert is typically based on a rule like: “Notify me when the price of an instrument is at or above/below a specified threshold.” The mechanics in a worked example usually separate two parts:
- Stable mechanics (what the rule means):
- Trigger level: a number you set (example: 1.1050).
- Trigger direction: whether the alert is for “upward” (≥ level) or “downward” (≤ level).
- Trigger condition style: whether “reaches” means “touches” exactly, or “crosses” past the level.
- Variable conditions (what can change in practice):
- Quote sampling: alerts may evaluate at discrete times rather than continuously.
- Bid/ask or mid price: different systems may use different prices, which can shift whether a condition is met.
- Costs and execution: even if an alert triggers, later outcomes can vary with spread, commissions, and order handling.
Worked numerical scenario (with stated assumptions)
Goal: Show when a price alert would trigger.
Assumptions (state these to make the example independently checkable):
- Instrument “X” has a price that is observed at specific times.
- The alert uses a touch-or-better condition: trigger when observed price is ≥ 1.1050.
- The alert checks the price at these times only: t1, t2, t3, t4.
- The observed prices at those times are exactly:
- t1: 1.1048
- t2: 1.1050
- t3: 1.1049
- t4: 1.1052
- Costs, spread, and any later trading actions are not part of the trigger decision in this example.
Alert rule: Notify when observed price ≥ 1.1050.
Step-by-step evaluation:
- At t1, price = 1.1048. Condition 1.1048 ≥ 1.1050 is false → no alert.
- At t2, price = 1.1050. Condition 1.1050 ≥ 1.1050 is true → alert fires.
- At t3, price = 1.1049. Condition is false, but the alert has already fired. (The example assumes a single alert event per level; some systems also allow repeated triggers.)
- At t4, price = 1.1052. Condition is true, but again this example assumes the alert already completed at t2.
What this shows: Under the stated assumptions, the trigger is unambiguous: it fires at t2.
Same level, different “reaches” definition
Now change only one assumption to show a common misunderstanding.
New condition assumption: “Reaches” means crosses above, not touches. Trigger only when observed price is strictly > 1.1050.
- At t2, price = 1.1050. Condition 1.1050 > 1.1050 is false → no alert.
- At t4, price = 1.1052. Condition is true → alert fires at t4.
This illustrates why a worked example must state how the trigger is defined.
Relevant limitations and risks (what can go wrong)
Even with a correct rule, the alert result can differ from what you expect because the “observable price” in real systems may not match your assumptions.
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Sampling and timing failure mode If a platform checks prices only at intervals, it may miss a brief touch between checks. In a worked example you can emulate this by using a discrete list of observed prices. If the list doesn’t include the level, the alert won’t fire.
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Different price references (bid/ask/mid) If a system evaluates using a price you didn’t account for (for example, bid vs. ask), the threshold might be met on one reference but not the other. A worked example should therefore specify which price is being used.
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Precision and rounding If the displayed or stored values are rounded, the true internal value could be slightly above or below your threshold. A worked example should state the rounding precision it assumes.