Direct answer
A worked example of Spot Forex is a fully numeric scenario that shows how a Spot Forex transaction can be interpreted and how the resulting cash flows are calculated, assuming specific inputs. The point is transparency: you can follow each calculation step and then independently verify it against your own execution details (such as the deal price, traded size, and any stated fees), without assuming any guaranteed outcomes.
Mechanism or definition
Spot Forex typically refers to exchanging one currency for another with settlement that is relatively near term, compared with longer-dated contracts. In practice, the “worked example” focuses on the mechanics you can compute from the deal terms:
- Base/quote currencies: In a quoted pair like A/B, the quote currency (B) is used to express the price of one unit of the base currency (A).
- Price and direction: The direction (buy vs. sell) determines whether you multiply by the price or divide by it when converting between the two currencies.
- Trade size: The size tells you how many units of the base currency are effectively exchanged (subject to provider conventions).
- Costs: Real-world results may include spreads and fees. In a worked example, these must be stated as assumptions, not as expectations.
Because market prices change and providers handle execution details differently, a worked example should clearly separate stable mechanics (how conversions are computed) from variable conditions (what your actual execution price and costs were).
Evidence or example
Here is one self-contained worked example using only stated assumptions and no live data.
Assumptions
- Currency pair: EUR/USD (EUR is base, USD is quote).
- You buy EUR with USD.
- Deal price: 1 EUR = 1.1000 USD.
- Trade size: 10,000 EUR.
- Fees/spread: ignored for the first calculation (we will model a limitation afterward).
Calculation (converting currencies)
- USD paid = (EUR bought) × (USD per EUR)
- USD paid = 10,000 × 1.1000 = 11,000 USD.
Now assume, as a separate cash-flow check (not a prediction), that later you sell the same 10,000 EUR at a different deal price:
- Second deal price assumption: 1 EUR = 1.1050 USD.
- USD received = 10,000 × 1.1050 = 11,050 USD.
Net cash change (before costs)
Net USD change = 11,050 − 11,000 = +50 USD.
Material limitation modeled as an uncertainty
If there is a spread/fee, the realized cash change can differ from the above. For example, if the buy price effectively costs you more USD per EUR than assumed, or if the sell effectively pays you less USD per EUR, the net cash change can shrink or reverse. A worked example should therefore include what cost terms were assumed (or set to zero) and make clear that real executions may not match them.
Limitations and risks
A worked example is useful, but it cannot remove key uncertainty. Material limitations commonly include:
- Execution differences: Your actual buy/sell prices may differ from the assumed “deal price” due to liquidity and timing.
- Spreads and fees: Setting them to zero is a simplification; including them can materially change numeric results.
- Provider conventions: Trade size handling, rounding, and settlement timing conventions can vary across providers and jurisdictions.
- Settlement and timing: Even if the concept is “spot,” the practical cash exchange timing can affect what you can do next.
Also, relationships seen in one historical scenario do not establish future results. A worked example should be treated as a demonstration of how to compute, not as a guarantee about what will happen.
Verification or next question
To independently verify a worked example of Spot Forex, use the same inputs that your execution record provides (deal price, traded size, direction, and any listed fees) and redo the conversion math step-by-step. If your output differs from what you see in your statement, the difference usually comes from one of these areas: the conversion convention used, rounding, or additional costs.
A helpful next question to ask is: Which exact price and cost fields (bid/ask, spread, and fees) does your provider statement use for the calculation?