As a beginner in the stock market, you might have come across some quite tricky as they depict a similar meaning. LTP and CMP are one of them. We have covered CMP previously, and in this blog, we shall focus on LTP.
Many people confuse LTP with the closing price of the market; let me break that notion: ‘NO, it is not’.
What is LTP in the Share Market?
LTP, or last traded price, is the price at which the stock was last traded. One can enter any amount they are willing to pay to buy or sell a stock.
For example, if one share of Zomato is for ₹ 100, I can still enter a buy order of ₹ 90 and let’s say you are willing to sell me a share of Zomato for ₹ 90 since our orders matched the trade will be executed. The current price will still be ₹100, but the LTP will change to ₹90 since the last trade was
The last traded price helps the investors to make trading decisions on whether to buy, sell, or hold the share.
LTP is not static; it changes constantly with each trade throughout the day. It denotes the price of the last order in the market.
It helps the investor to assess the value of the stock and the price fluctuations of that particular stock.
How to Calculate LTP?
Calculation of LTP is made on a real-time basis and is simple. The last price at which the buying and selling order was executed becomes the LTP. Every time a trade occurs, the LTP will change.
The selling price at which the seller is willing to sell is the asking price, while the price at which the buyer quotes to buy is known as the bid price. When these two price matches the order is complete. And the price of the last order becomes LTP for that particular trading day.
Trading volume also influences LTP. The volume of trade made during a given period is trading volume. A higher trading volume increases the impact of individual trades on overall price. The larger the volume, the more the chances of price fluctuations.
So, you must be wondering if this is not the current price and changes after every trade, what the actual use of LTP is.
Let’s take a look.
Significance of LTP
- Price movement prediction
The last traded price helps predict the movement of stock prices and understand price fluctuations. It gives you an idea of fluctuations in the share price.
Based on this, you can determine whether to enter or exit the stock and the price at which you should take action. - Price Discovery
Remember going to the vegetable market with your mother? Did she buy vegetables from the very first vendor? No, right, she would go down the market and ask for prices at every shop, then decide where to buy the particular vegetable.
All our mothers would make excellent investors because what they did was nothing but price discovery. LTP helps you do exactly this thing; instead of knocking on every investor’s door, you just see the LTP of that stock, and you get the idea.
LTP vs Closing Price
The last traded price, LTP is the last price at which trades were made during a trading session.
Whereas closing price is calculated as the volume-weighted average price of all the trades made during the last half an hour i.e. 3 pm to 3:30 pm of the trading session.
LTP helps assess the real-time insights of the stock price in the market. Whereas the closing price is used as a reference point to understand how well the stock has performed in the market.
To understand the last traded price and closing price better, let’s take an example.
1. • Time – 3:12 PM
• Price – 100
• Volume – 800
~Trade value = 80,000
2. • Time – 3:15 PM
• Price – 102
• Volume – 1000
~ Trade value = 1,02,000
3. • Time – 3:17 PM
• Price – 105
• Volume = 900
~ Trade value = 94,500
Total Volume = 2700 (800+102+900)
Total Trade Value = 2,76,500 (80,000+1,02,000+94,500)
Closing Price = Total Trade Value / Total Volume
= 276500/2700
= ₹102.40/-
Hence, the closing price is ₹102.40, whereas the Last traded price is ₹105
Bottom Line
We understand that LTP is the last traded price at which the most recent order took place.
We also need to understand that this analysis will not only help to understand the price fluctuation but also help determine the entry and exit time.
LTP plays a small role in making decisions, but proper analysis can help you save money. Keep learning, and keep growing.!
Frequently Asked Questions
- What is LTP?
LTP is the last traded price of a stock in the order made at the market during the trading session. - Are LTP and market prices the same?
No, market price is the price at which trades take place in the security market. Whereas the Last traded price is the price of the last order in the market. - Are ATP and LTP the same?
Average traded price is an important terminology in the stock market but it is different from Last traded price. ATP is an average price over a specific period which is used to assess the stock price trend and to make investment decisions.