What is LTP in the stock market

What is LTP in the Stock Market? SMC Global Securities

In the Indian stock market, LTP is an important indicator since it shows the price at which the most recent trades took place. It assists investors in determining the mood of the market and helping them make wise choices. It represents a stock’s supply and demand dynamics at any particular time, affecting trading tactics and price changes.

The closing price or market price is often confused with LTP. However, in practice, the market and closing prices differ from the last traded price or LTP. Let’s dive deep into what is LTP in stock market and learn the basics like LTP full form in stock market.

LTP Meaning

LTP full form in stock market is the Last Traded Price. Every trading day, the price of the stocks fluctuates since supply and demand influences the price. The stock price rises when there is a greater demand than supply. In contrast, the price of the stock drops when supply exceeds demand. This is the LTP meaning in stock market.

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Buyers bid on stocks by proposing a price they’re willing to pay for the stock, which is referred to as the bidding price. Sellers determine the stock’s asking price at a rate at which they are prepared to sell their shares. Both sides reach a price that benefits them when the stock exchanges match the rates. This is where LTP comes into play. LTP in stock market means the price at which this stock transaction concludes.

The last traded price is closely related to market liquidity, a critical indicator that indicates the frequency of securities deals, which can occur several times per second.

The last traded price (LTP) can typically be seen in the market’s last column or depth. Because the Last Traded Price (LTP) depends on market liquidity, illiquid markets have relatively few trades at a broad range of prices, which maintains the LTP far from the market price.

LTP strategy in the stock market

The last traded price offers significant insights into future price fluctuations and represents the most recent sentiment of the market. Traders use LTP trends to determine when to enter and exit the market and to assess market momentum. One popular method they can use to verify trade signals is comparing LTP in stock market with other important indicators, including price patterns, volumes, and moving averages.

For example, when the volume increases, and the LTP climbs over a large moving average, it might indicate a bullish trend and encourage traders to consider buy positions. Just like that, a decline in LTP and a decrease in volume might signal weakening momentum or a possible reversal, enabling traders to reduce their holdings or consider going short.

Thus, caution is needed to minimise potential losses. LTP analysis should be supplemented by in-depth study and risk management techniques.

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How is LTP calculated?

The LTP is determined by taking the average of the highest bid and lowest ask prices for stock at a particular time. The stock’s current market value is then calculated using the LTP.

Remember that when orders are filled, and new bids and requests are made, this price could vary during the day. Furthermore, as specific trades may occur at prices higher or lower than the Last exchanged Price, this may not always accurately reflect the price at which the stock was traded.

Impact of LTP on Stock Prices

As you already know, LTP in stock market reflects a stock’s most recent transaction value; thus, it significantly impacts the stock prices.

  • Investors frequently use LTP as a critical point of reference to determine the stock’s current market value and help them make wise decisions.
  • Higher LTP volatility might result in elevated trading activity and shifts in prices.
  • Unexpected fluctuations or significant modifications in LTP could trigger buying or selling activities, impacting the market’s mood.
  • In technical analysis, LTP plays a crucial part in assisting investors in determining the momentum and trend direction of the stock.
  • Traders keep close tabs on LTP trends to gain understanding of the short-term dynamics of the market and to spot possible entry or exit points.

Remember that the last traded price is generally relevant throughout the day; at the end, it becomes the closing price.

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Why does the Intrinsic Value differ from the Last Traded Price?

The last traded price (LTP) and intrinsic value of a company in the Indian stock market sometimes differ for various reasons.

Since no asset is guaranteed to be purchased or sold at any given time, it is impossible to determine the exact value of an investment. For example, a share may be purchased later for a higher price (a more excellent intrinsic value). As a result, the last traded price does not equal the intrinsic value.

Moreover, prices can be distorted and deviate from their intrinsic value due to speculative trading and market manipulation.

Difference Between LTP and Closing Price

Last Traded Price Closing Price
The most recent trade’s price. An asset’s price at market closure.
It fluctuates regularly throughout market hours. Fixed at the end of the trading session.
LTP helps in decision-making in the present moment. It is used to analyse performance on a daily basis.
It depends on the most recent transaction. It is not dependent on any certain trade.
LTP indicates the current state of the market. Closing price indicates the summary of the daily market.

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Conclusion

LTP is a standard tool traders use to assess market liquidity and pinpoint possible entry and exit points. In the ever-changing Indian stock market, keeping an eye on LTP along with other indicators aids investors in managing volatility and seizing chances. This improves overall trading success.

Now that you know the LTP meaning in stock market and its significance, remember that individuals must consider their risk tolerance, investing objectives, and investment time frame to make informed decisions.

Reference: 
https://www.investopedia.com/
https://www.bajajfinserv.in/

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