LTP Meaning in Stock Market
The full form of LTP is Last Trade Price/Last Traded Price. In the stock market, there are thousands of traders (buyers and sellers) bidding for a stock at different prices. The price at which the final trade happens between a buyer and a seller is called the Last Traded Price.
For instance, I googled ‘Dr Reddy Stock Price’ at 9:16 am, and the stock price was ₹ 4,959.
Again at 10:55 am I googled the same and the price had changed to ₹ 5,210.75.
So the price you see at 10 am or anytime, is the Last Traded Price of the stock.
Content
- Let’s understand LTP in Trading with Apples.
- Significance of Trading Volume in LTP.
- Trading Volume & LTP in Shares with Market Depth.
- What is the Closing Price of the stock?
- Difference Between Closing Price and LTP?
- Quick Summary
Let’s understand LTP in Trading with Apples.
Assume you go to buy apples in the unorganized market:
- The fruit vendor Ashok is selling apples at ₹ 100 per kg. (This is called the ‘Ask Price’).
- But you are willing to pay only ₹ 80 (This is called the ‘Bid Price’).
- Right beside Ashok, there’s another fruit vendor who is selling the same quality apples for ₹ 85 per kg (Another ‘Ask Price’). You think its a good deal and buy the apples at ₹ 85.
- The price at which the seller agreed to sell and you agreed to buy the apples is called Traded price.
Similarly in the stock market, the sellers willing to sell the stock at a certain price is called ‘ask price’, and the buyers willing to pay a certain price for the stock is called ‘bid price’.
When the seller’s ‘ask price’ matches the buyer’s ‘bid price’, the trade happens. And the price at which trade happens is called Traded Price.
There are thousands of people buying and selling stocks every second in the stock market. With every trade, the traded price changes, and every price change is called Last Traded Price.
Now that you have understood the concept of LTP, let’s understand how Trading Volume plays an important role in determining the LTP.
Significance of Trading Volume in LTP.
First, let’s understand what is trading volume?
Trading volume is the number of shares bought and sold at a particular price and time.
Some stocks like ‘SBI’ have high volumes of trades while some stocks like ‘Uttam Value Steels’ have very low volume.
High volume means a large number of buyers and sellers are trading and low volume means there are very few to no buyers and sellers trading in a particular stock.
When there are more people trading, sellers are more likely to sell the stock at the exact ask price they wish to and buyers are more likely to buy the stock at the exact bid price.
On the other hand, with lower volume, the sellers may not be able to sell the stock at the exact ask price they wish to, as there are very few to no buyers to buy the stock.
To further simplify, let’s understand Trading Volume & LTP with Market Depth.
Trading Volume & LTP in Shares with Market Depth.
Market Depth helps buyers & sellers decide how close the bid/ask price should be to the current trading price to become LTP.
Let’s put things in context, consider the market depth of Reliance September Futures:
Following points to be noted from the above image:
- Reliance September Futures is trading currently at ₹ 2,317.50 (Marked in white)
- The closest sell price is at ₹ 2,317.50 (Marked in yellow)
- The closest buy price is at ₹ 2,317.00 (Market in pink)
Now let’s understand what’s happening here:
- There is a seller who wants to sell 505 quantities at ₹ 2,317.50
- And there are 2 buyers who are willing to buy 32,320 quantities at ₹ 2,317.00
- From the market depth, the seller can easily determine that if he changes his sell price from ₹ 2317.50 to ₹ 2,317.00, the order will be executed immediately.
- And the buyer can determine that if he changes his buy price from ₹ 2317.00 to ₹ 2317.50, the order will be executed immediately.
That’s how market depth helps buyers & sellers decide how close the bid/ask price should be to the current trading price to become LTP.
Before we conclude, you need to understand another term ‘Closing Price’ which is co-related with LTP.
What is the Closing Price of the stock?
The ‘closing price’ is the last traded price of the day. For example: Let’s say today at 3:30 pm when the markets close, the last traded price of Reliance Futures is ₹ 2350.00. This ₹ 2350.00 is also known as the closing price of the stock.
Difference Between Closing Price and LTP?
Last Traded Price is the stock price you see when the Market is Active whereas Closing Price is the stock price you see when the Market Closes.
Quick Summary:
- The full form of LTP is Last Trade Price/Last Traded Price. Last Traded Price is the Price at which the Trade happens between a buyer and seller of a particular stock.
- Trading volume is the number of shares bought and sold at a particular price and time. In the high volume stocks, you are most likely to buy and sell at the desired bid/ask price. On the other hand, in low volume stocks, it is hard to buy and sell at the desired bid/ask price.
- Market Depth helps buyers & sellers decide how close the bid/ask price should be to the current trading price to become LTP.
- Closing Price is nothing but the Last Traded Price of the Day.
- Last Traded Price is the stock price you see when the Market is Active whereas Closing Price is the stock price you see when the Market Closes.
