What is LTP in Share Market?
The
price of a stock listed on the share market is never static. It keeps on rising
and falling based on the demand and supply among the buyers and sellers. The
sellers set the Ask Price of a stock at the rate at which they are willing to
sell the shares held with them. At the same time, the buyers offer a Bid Price of
a stock at the rate at which they are willing to purchase the shares. The stock
exchange matches the rates between the buyers and sellers of stocks to make trades
at compatible prices. The price at which the sale of stocks is concluded
becomes the LTP i.e. Last Traded Price.
This
article helps you understand more about LTP in the share market.
What is LTP in the Share Market ?
Last
Traded Price is the most recent price that the stock was bought and/or sold at.
It is a number of the past and hence helps to understand how the price of a
stock has fluctuated in the past.
It is
a reliable metric to assess the valve of stock and also helps to determine how
the stock prices will fluctuate in the future. It helps to estimate the
possible range of a stock based on its past trading history. It aids in establishing trends in the price of a
stock.
In the
share market, it takes only 6 microseconds per trade execution. Since several
trades take place every microsecond, the Last Traded Price of stock can get
changed several times in a second.
The
LTP keeps on changing as per the demand and supply of the stocks. This means, that
with every successful trade, the LTP will change.
After
understanding LTP meaning in share market, let us understand how LTP is
determined.
Example
to Understand How is
LTP Calculated
Let us
understand the concept of LTP with the help of an example.
Let's
say, a seller wants to sell the shares of XYZ Limited at Rs. 200 per share.
That means the Ask Price is Rs. 200.
There
is a buyer who is willing to pay a maximum of Rs. 180 for the same share. That
means the Bid Price is Rs. 180.
Now,
since the Ask Price and Bid Price do not match, the trade cannot take place.
Now,
let us assume that another seller enters the market who is willing to sell the
shares at Rs. 180 per share. That means the second Ask Price is Rs. 180.
Now,
since the Ask Price matches the Bid Price, the trade will take place at Rs.
180.
The
price at which this trade happens i.e. Rs. 180 is referred to as the Last
Traded Price.
Trading Volume Impacts LTP
Trading
Volume plays a significant role in determining LTP in the share market.
Trading volume is basically the quantity of a particular stock that is being
traded at any given time.
The
more a stock gets traded in the market, its trading volume increases. This in
turn increases the volatility of a stock. More volume and volatility mean there
are an increasing number of buyers and sellers playing in that stock. Thus, with
more volatility, the LTP of that stock fluctuates even more rapidly. Hence, LTP
is highly manipulated by the trading volume.
In
Conclusion
LTP is
one of the important indicators for a share market trader or investor. It
serves as a valuable piece of information as it tells you the last price that a
buyer was willing to pay for a particular stock. You can use this price
information to place your Ask Price or Bid Price.
Open online derivatives trading account with Indira securities, leading equity derivatives in India.