What is LTP in the Share Market?

LTP stands for Last Trading Price, a common term in the stock market. The market is dynamic, and prices always rise or fall based on supply and demand. In that sense, the LTP reflects this by showing the investor the price point at which the last trade took place. This becomes important information to investors, giving them direct details on the value of a particular stock.

LTP simply means the price at which a given equity stock was last bought or sold on the exchange. You can imagine a marketplace where stock prices are continuously moving in compliance with the pressures of buying and selling. The LTP shows the latest executed deal, thus giving you an idea of the stock’s current worth. Knowing this is essential information for investors before buying or selling shares.

Importance of LTP in the Share Market?

LTP is a starting point for traders to set their ask and/or bid prices. One of the most critical pieces of information a trader has to know is the LTP for a particular stock in the stock market. Every discussion stock exchange is a trade, and the price at which this is agreed on is captured in the Last Traded Price. Why would something that sounds like such a simple number be so important to an investor? Here’s why LTP is important in the share market:

1. Real-Time Information

The LTP indicates the latest price at which a stock was sold or purchased, giving a snapshot of the stock’s current worth.

2. Intraday Trading

Active traders who profit from intraday changes in stock prices can use LTP fluctuations to determine their trades’ exit and entry points.

3. Market Sentiment

Following LTP fluctuations can help you gauge investor sentiment—whether bullish or bearish. A rising LTP indicates a positive sentiment and vice versa.

4. Informed Decisions

LTP helps you decide whether to buy or sell the shares. You can then match it with any target price or analyse the trends for any opportunity.

To make well-rounded investment decisions, consider it alongside other factors, such as trading volume and company news.

How is LTP Calculated?

The real-time calculation of the last traded price (LTP) is intricate. It constantly updates the trading screen in response to ongoing transactions involving the corresponding security. Depending on each transaction, LTP is significant within the confines of the specific trading session or day. The emergence of the LTP is closely linked to the market’s liquidity, a key metric denoting the frequency of security trades, often happening multiple times per second.

Every stock market trade must consist of these three participants:

• Sellers looking to sell a stock
• Bidders looking to buy a stock
• The Exchange that facilitates the trade

Let’s understand this with the help of an example: 

Let’s say a seller wants to sell a stock of company A for Rs. 2000. Thus,

Ask Price: Rs. 2000

A buyer wants to buy stock at the maximum price and may be willing to pay Rs. 1800. Thus,

Bid Price: Rs. 1800

However, since the Ask and Bid prices are different. Later in the day, a new seller willing to sell the stock at Rs. 1800 enters the market. Thus,

New Ask Price: Rs. 1800.

Since the second price is at which trade successfully takes place, this is called the traded price.

Thousands of trades can take place in the stock market during the entire trading session, so stocks with high liquidity fluctuate depending on demand and supply. Here, the price at which the stock is last traded is the LTP or last traded price.

What is the Effect of LTP on Stock Prices?

A stock’s Last Traded Price (LTP) significantly influences its future prices due to market efficiency. According to standard theory, markets swiftly and seamlessly integrate all available information into the price at which the stock trades. However, suppose investors cannot comprehensively analyse all data or properly weigh different information types. In that case, their trading decisions might depend more on the latest transactions and their experiences with similar stocks. This dependence can create a relationship between the LTP and upcoming trades. Market-making is when one individual sells his share, and another buys it. It is essential for an orderly functioning market.

What is Trading Volume of LTP in the Share Market

In the share market, the trading volume of LTP refers to the number of shares traded at the LTP within a specific period. It is crucial in estimating how close the asking price should be to the LTP. If trading volume is high at the LTP, it means intense market activity and investor interest, indicating that the sellers and buyers can label their shares at the desired bid and ask prices.

Conversely, low trading volume might suggest less interest or fewer transactions. Learning about trading volume alongside the LTP helps investors understand market sentiment and make informed decisions. For example, a sudden increase in trading volume at the LTP might signal potential price movements. Additionally, LTP is subjective to the last price at which investors exchanged stocks, so it can only calculated if an actual transaction happens. 

Also Read: How to Predict Gap-Up and Gap-Down in Stock Market?

Difference between LTP and Closing Price 

The key difference between the LTP and the closing price is as follows:

How to Use Last Traded Price to Make Smart Trading Decisions?

Traders should use LTP as a real-time reference point to gauge current market sentiment, identify potential entry and exit points, make smart trading decisions and assess the immediate price direction. They should consider factors like price volatility and recent trade volume alongside the LTP to make smart trading decisions based on the current market scenario. Here’s a quick overview of how to use LTP. 

1. LTP and Trading Volume Rises

If you witness the LTP and its upward trading volume, it can signify a bullish trend. A bullish trend is the best market scenario for entering into long positions. 

2. LTP Rises and Trading Volume Declines 

However, if the LTP trends upward but the trading volume declines, it may indicate a mild bullish trend. Since the trend might reverse, it is best to exercise caution during such market scenarios. 

3. LTP Declines, and Trading Volume Rises 

If the LTP trends decline and the trading volume rises, this may indicate a bearish trend. During a bearish trend, you may consider entering short positions. 

4. Both LTP and Trading Volume Declines 

If both the LTP and the volume move decline, this may indicate a mild bearish trend with the possibility of a trend reversal. During such incidents, it is suggested that you remain careful and look for signs of reversal.

Conclusion

Keeping an eye on the Last Traded Price, or LTP, in the stock market can help you understand how an asset’s price trends. Based on recent trading activity, it is a crucial indicator of a stock’s current value. Although the last traded price is not a standalone indicator of price or market trends, its live updates make it valuable for investors and traders looking to make informed trade decisions in a fast-paced market environment.