One of the most seen yet not elaborately discussed terms in the share market is the LTP or Last Traded Price. Every day, millions of transactions in the market take place in every instance, and in every instance, the stock market updates the LTP for every asset registered with it.
LTP meaning the Last Traded Price generally indicates at which price a particular asset was traded in the market in the previous instance. LTP can be seen in both buying and selling columns of an asset registered in the market. LTP can also be said as the bidding price at which a trader is trying to buy an asset or sell an asset.
Let us go deeper into the LTP or Last Traded Price to know how it works and its significance.
What’s LTP Meaning in Share Market?
By Definition, Last Traded Price LTP’s full form in the share market is Last Traded Price) is the last price at which the latest trade occurred in the market for equities or options contracts. The occurrence of the last traded price or LTP depends on the volatility and liquidity of the market. Based on these two factors, the LTP or the last traded price is displayed within fractions of seconds, minutes, hours, or even a day earlier.
Explanation of LTP
Now let us understand in an easier way with an example of LTP’s meaning in the share market.
From one angle, we can say LTP is the quote on which trades are settled in the stock market. For example, someone wanted to purchase some shares of a company, say, Pfizer, at INR 4900; at that same instance, someone wanted to sell his/her shares of the same company. Therefore, two bidding prices or quotes of two individuals get matched, and the trade gets executed on the market. Here, for that particular instance, the LTP or Last Traded Price of the asset (here Pfizer) will be INR 4900.
In the stock market, every moment, thousands, even millions of buying and selling orders get executed, and the price at which the very last trade was executed for a particular asset, that is the LTP or Last Traded Price.
LTP for every asset changes very frequently, even a few times in a second. The LTP also works and is known as the meter for market movement.
The Dependencies of LTP
LTP is considered very loosely dependent on various market factors like company performances, announcements, bonuses, dividends, share splits, intrinsic assets of the company, liabilities, etc. But LTP is very tightly coupled with Volatility or Volume of Trade.
The more an asset gets traded, the more its volatility increases and the more frequently its LTP gets updated. The trading volume can be explained as the number of trade orders of an asset is being executed in every instance.
Trading Volume and LTP Calculation
The trading volume of an asset represents that, at a certain time frame, how many buyers or sellers are involved in transactions of a particular asset and how much they are bidding to buy or sell the asset.
If there are too many buyers and a smaller number of sellers, the LTP generally goes up, which means the asset’s price for that particular time frame is increased.
On the other hand, if there are too many sellers and not many buyers available, the LTP falls, which means the price of that particular asset during that time frame depreciates in the market.
But there are many occasions when the number of buyers or sellers becomes equal or nearly equal, and the trades get executed at a slower pace, meaning the price movements become less frequent or even the LTP can become static.
How LTP is Calculated in the Market?
Suppose on a certain time frame in the stock market, there are only two traders engaged in a trade of a particular asset, says Pfizer. One trader wants to purchase it for INR 4910 per equity. Now another trader wants to sell the same number of equity shares of Pfizer at INR 4910, at the same exchange.
Therefore, the stock exchange simply works as a medium, and the brokers work as mediators for transferring the Pfizer stocks from one trader to the other. The exchange also marks the amount of INR 4910 as the Last Traded Price for that particular asset. Now depending on the volatility of the asset in that instance, the next executed bid will become the next LTP for the same asset.
Therefore, LTP can be said as the bidding price or quoted price of an asset for a particular instance of the market, on which a seller is selling his/her assets, and simultaneously another buyer is buying that asset at the quoted price.
Usually, LTP changes very rapidly and never stays constant. But, there are two instances when the LTP of an asset stays static that infers that the stock price is in the upper or lower circuits.
How Big is the LTP for the Stock Market?
LTP is considered as the first marker that defines the value of every tradable asset in the market. LTP gives the first hint to the traders of any stock’s price rise or price drop. All the speculations and calculations to give a quote for the assets are generally calculated by LTP.
The movement of LTP can easily be graphed, and the traders calculate the quotes for their desired trading prices using it. These are generally viewed in candlesticks, and even the sudden and slight movements of the LTP show how a particular stock price is going to behave in the next few minutes and hours.
The historic data of the LTP also provides future projections for the shares and gives the investors a clear view of profit and loss.
These days, the stockbrokers and stock market offer a large variety of indicators and calculators such as MACD, VWAP, Moving Average, Weighted Average, VWMA, etc., to effortlessly and quickly predict the movement of the LTP and put the best quote for their assets.
Sometimes, people get confused with the fast movement of the LTP. The more trades get executed in the market, the more movement we can observe, but as various indicators and calculators are available in the market, it becomes easier for us to quickly speculate the future instances of LTP.
And LTP is not the Closing Price of an asset on a particular trading day. Closing Price is the weighted average of all the LTPs during the last 30 minutes of the asset on that day.