The prices of most stocks change every minute, or sometimes every second. The last traded price in the share market is the price at which the last trade happened.
The entire concept of LTP in the share market runs based on prices and volume at different times. Several transactions, at various prices, occur in stock on a single trading day, and the stock’s opening, closing, and last traded price are determined based on it.
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The last traded price is the price at which the last trade happened in a particular stock at any time. The last traded prices differ among stocks and at different points in time. Here is an example which would help you easily understand the concept of LTP.
Suppose a stock traded at the following prices at different times in a day.
|Time||Price at that time|
Explore: Stock Market Timings in India
Importance of Last Trading Price (LTP)
The LTP in the share market is one of those numbers that investors may consider before placing a trade order. It helps the investors/traders to decide a price at which they can place buy or sell orders. Usually, the nearer the price quote by the buyer or seller to the last traded price, the better the chances for the trade order getting fulfilled.
The series of last traded prices may help you determine the price trend of the particular stock for that particular trading day. Additionally, they can also predict price movements.
How is LTP Calculated?
One does not need to manually calculate the last traded price as it is usually available on the trading screen against the concerned stock. Simply put, a last traded price is the price at which the buy and sell order was executed most recently. The last traded price changes every time a trade occurs in the market. Therefore, a last traded price is only relevant for a particular trading session or a trading day.
How frequently the last traded price changes depend on the stock’s liquidity. If a stock is bought and sold easily and frequently in the market, its last traded price will alter frequently, and vice versa.
The LTP is one of the factors traders/investors may consider before buying or selling securities. Trade orders are likely to be fulfilled when the bid (the highest price the buyer is willing to pay for stock) and ask prices (the lowest price at which the seller is willing to sell the stock) are near the last traded price. Therefore, buyers and sellers need to observe LTP and quote prices accordingly.
If they quote bid/ask prices significantly below or above the LTP, they would need to adjust them after looking at the LTP range of a particular trading day or trading session.
Difference Between LTP and Closing Price
The meaning of LTP is simple; however, it is often confused with the term ‘closing price’. Though, LTP and closing prices differ significantly.
The closing price of a stock is determined based on the weighted average price for the trades taking place during the last half an hour (3:00 PM to 3:30 PM in India). The reason behind considering the last half an hour for arriving at the closing price is that many stocks are traded massively in the final half hour.
Let’s understand the difference between LTP and closing price with an example. For the sake of understanding, assume that there were the below-mentioned trades during the last hour of a trading day.
|Total volume = 3100||Total trade value = ₹3,25,200|
Here, the closing price can be calculated this way:
Closing price = Total trade value/ Total volume = ₹3,25,200/3100 = ₹104.90
Thus, the closing price is ₹104.90, whereas the last traded price is ₹106.
Points to Remember
- If there are no transactions in the last half hour of the trading day, the LTP and closing price would be the same.
- If fewer transactions occur during the last half hour of the trading day, the gap between LTP and closing price may be smaller.
- If there are several trades during the last half hour of the trading day, the gap between LTP and closing price may be higher.
To sum up, the last traded price at any time is the price at which the latest trade between buyer and seller happened. Buyers and sellers may consider LTP to decide at which price they can trade a particular stock. LTP of any stock can usually be observed from stock trading platforms. An important thing to note is that the LTP and closing prices of the stock can be different.
Frequently Asked Questions
Stock trading volume had an impact on the LTP in the share market. Trading volume is the quantity that is being traded at any point in time during trading hours. The trading volume affects the volatility of the price of a stock and thus also impacts the share’s LTP. A higher trading volume implies there are many buyers and sellers for a particular stock. On the other hand, a lower trading volume implies lower orders being placed. Higher volume and higher volatility imply higher interest among the buyers and sellers in that stock. As a result, with higher market volatility, the LTP of that stock fluctuated more quickly. Therefore, LTP is heavily influenced by trading volume.
The intrinsic value of a stock is its true value. On the other hand, LTP is the price at which the last trade happened for the stock. The intrinsic value and the LTP are not equal since the market’s demand, and supply parameters largely drive the share price up or down. Due to constant buying and selling, stock prices move rapidly. As a result, the share prices are never constant. Furthermore, when the stock is in an uptrend, the LTP is always greater than the previous LTP. On the contrary, when the stock is in a downward trend, the LTP is always lower than the previous LTP.
LTP stands for Last Traded Price. It is the price at which the last trade has happened between the buyer and seller.
No, LTP is not the same as the market price or the current market price of the stock. LTP is the price at which the last trade was executed between the buyer and seller. While the market price or current market price is the price at which the buyer will buy the stock (ask price), or the seller will sell the stock (bid price).