What is Last Traded Price in Stock Market Parlance?
For a novice, the world of trading can sometimes be daunting, with confusing abbreviations and terms that seem to have the same meaning. Therefore, it becomes important to distinguish all such concepts to gain a basic understanding of the share market and trade proficiently. In this blog, we take a look at Last Traded Price, abbreviated as LTP.
In the stock market, Last Traded Price is the price at which a share was last traded or bought and/or sold. It can be a reliable measure for assessing how the share price has fluctuated in the past. The last traded price of a share changes with every successful trade or transaction that takes place. As shares are bought and sold continuously on the stock exchange, the LTP is active for mere seconds, after which it changes in value.
It is important to note that the last traded price of a share is only determined when an actual transaction takes place. It depends wholly on the last price at which investors exchanged the shares.
Why is the LTP of a share important?
The LTP in the stock market is essential in determining attributes such as the direction in which the share prices are moving.
For example, let’s assume three sellers of shares of company ABC are asking for prices of Rs 10, Rs 12, and Rs 15. Initially, the buyers of the share accept the price of Rs 10, and when they realize there are no more sellers at Rs 10, they increase their buying price to Rs 12. The share price has thus increased to Rs 12. Now, the third seller, not finding any buyers at Rs 15, will have to lower his asking price of Rs 15 to Rs 12, based on the last traded price.
In the actual stock market, hundreds of trades, such as this one, take place simultaneously, and the prices keep on fluctuating. Hence, the LTP is an indicator of the movement of the prices in real time.
Also, LTP in the stock market makes it easy to place a market order since the selling or the ask price and the bid or buying price are in comparable ranges. However, because the stock market fluctuates, there is no certainty that sellers and bidders will be able to complete a deal at the intended price.
Is LTP the same as the closing price of a stock?
Now you may ask, is the price at which the stock was last traded during the day the same as the closing price of the day?
From a logical point of view, it does seem that way. However, the closing price is not just the price at which the last trade occurred. Most stock exchanges use different techniques to calculate the closing price for the day. The National Stock Exchange (NSE) considers the weighted average price for the trades occurring during the last 30 minutes of a day to arrive at the closing price. Due to this, the LTP in shares might not always match the closing price of the shares.
In conclusion, the LTP in shares is one of the many metrics and numbers one has to keep in mind before trading. Its relevance is most apparent when you are attempting to determine what price to quote for your buy or sell order. And though the LTP and closing price of a share seem similar, they mean different things and may have different values.
Q. Is the last traded price of the day the same as the closing price of a share?
A. While the closing price should ideally be the same as the last traded price of the day, there may be a slight discrepancy. This is due to the fact that, generally, a lot of trading of shares is done in the last 30 minutes of the day. As a result, stock exchanges often use the weighted average price of this trade period to compute the closing price.
Q. How is LTP useful to an investor?
A. When placing a buy or sell order, the last traded price of a share can be used as the base price. When trading volumes are high, most traders will buy or sell at a price near the LTP.