Last Traded Price (LTP): Meaning, Calculation & Importance
During trading sessions, a share’s opening and closing prices work as effective parameters to understand the future trajectory of that particular stock. However, another important price factor is the last trading price, which is mostly used by intraday traders.
Last traded price (LTP) of a share is the base price factor that helps to determine the value of the next trade for that particular share. It frequently changes during trade sessions and helps intra-day traders understand a particular stock’s behaviour.Read on to learn the benefits and importance of last traded price.
What Is LTP?
During stock market trading hours, share prices frequently fluctuate as the buying and selling takes place.l When purchasing a stock, the last price at which that stock was sold is called Last Traded Price (LTP).
This price works as a base factor for future sales of that particular stock. The LTP of stock constantly fluctuates as the trade price keeps changing with each transaction.
LTP can be used as an effective indicator to understand the stock’s future behaviour. A chart of LTP data collected over a given period of time works nicely as an analysis tool for intra-day traders and experts.
How Does LTP Work?
During trading hours, multiple buy and sell orders are placed for a stock every second. These orders are matched, and each matched trade is executed at a mutual price between the sellers and buyers. This set price is referred to as last traded price.LTP primarily depends on the demand and supply cycle of a stock and its traded volume.
What Is the Importance of LTP?
LTP of a stock helps to determine its trade history and future prospect. Hence, investors and especially intra-day traders, use LTP to make appropriate investment decisions. Here’s why LTP is considered to be an important price indicator:
- Base Price of the Next Trade
Last traded price works as the mutual parameter for determining the appropriate trade price of a stock between investors. Based on the LTP for the latest transaction, investors can determine the price at which they want to buy or sell a share.
- Helps to Predict a Stock’s Future Trajectory
Understanding the future movement of a stock is very important, especially for intra-day traders. Determining if the share will go upwards or downwards at the right moment can be profitable during a live trade. Besides, understanding the market’s current flow can help you quickly raise or lower your asking price to improve your chances of a sale/purchase.
How Is LTP Calculated?
Last traded price is simply the price at which the most recent trade was executed. Hence, it notably does not have a formula for calculation. LTP is better tracked and recorded at a quick frequency during a trading session. Generally, brokerage platforms provide the value of LTP of a particular stock.
During a trade in the market, investors owning shares of a particular company place sell orders; simultaneously, investors willing to buy stocks of that particular company place buy orders. The orders that match are executed at a mutually acceptable price, and the orders that don’t match are executed at a later time when another order matches the request. The price at which an order is successfully executed is considered the LTP of the stock until another order succeeds the price.
Hence, LTP of a share keeps changing very frequently as thousands of trades take place during a trading session. An LTP or multiple LTPs during a trading session is valid for only a single day.
It is to be noted that successful execution of a trade not only depends on a matching price but also on volume of shares in demand and availability of the same.
Example of LTP
To understand the calculation process of LTP, you can follow the example given below.
Let’s say investors A and B place sell orders for stocks of FR Limited at an asking price of ₹50 and ₹56 per share, respectively. At the same time, investors C and D place buy orders for stocks of FR Limited at ₹56 and ₹45 per share, respectively. Now, as investors B and C’s demands have matched, this sale will be executed at ₹ 56/share. However, the orders of investors A and D will not be executed at that moment. Thus, the LTP for FR Limited shares at that moment will be ₹56.
Now let’s say investor E places a sell order for ₹45/share, and investor F places and buy order for ₹50/share at a later point during the same day. At this point, the exchange will match the pending orders of investors A and D with E and F, respectively. Therefore, the LTP will change to the latest sale, which will change to ₹50/share from ₹56/share.
What Is the Difference Between LTP and Closing Price?
Listed below are the differences between LTP and Closing Price:
|Last Traded Price (LTP)||Closing Price|
|The latest price at which a share trades is its LTP.||Closing price of a stock is the price of the last transacted price in a security before the market officially closes for normal trading.|
|LTP can change several times a day.||There is one closing price per day.|
|It is based on one particular trade.||It is based on multiple trades made during a particular duration.|
However, LTP and closing price of a stock for a day can be the same if no trade is executed during the last 30 minutes of a session.
What Are the Shortcomings of LTP?
LTP of a share cannot be used as a definite parameter to analyse its behaviour as it is constantly fluctuating. During a trade session, LTP of a share can change multiple times in a few seconds.However, it is a widely used indicator in intra-day trading; traders can use it to tip sales to their advantage by fluctuating LTP intentionally.
Equity investors consider LTP as an important parameter to understand a share’s price behaviour. In addition, LTP is important to determine the future trade price of a share. However, it is commonly confused with closing price, which might affect your trading decisions; hence, it is important to know their differences and their individual significance in the stock market.
Frequently Asked Questions
What are the three important types of prices to follow in the stock market?
The three primary types of prices to follow in a stock market are opening price, closing price and last traded price. For practical purposes, all charts plotted on the daily timeframes use the Closing Price (not the LTP) for plotting.
How to buy stocks online?
Stocks can be purchased online via an online brokerage platform. All investors require is a DEMAT account to store their purchased securities.
It is safe to invest in stocks online as all brokers and companies are registered under the Securities and Exchange Board of India (SEBI). However, it is equally important to do your own research before purchasing a stock.
Which authority oversees stock trading in India?
All share market activities and participants in India are monitored by the Securities and Exchange Board of India (SEBI). It is a dedicated regulatory body of the Government of India created to safeguard the interest of investors and ensure safe trade practices.
What is the difference between LTP and opening price of a stock?
LTP is a stock’s most recent trade price, which works as the base price for its next trade. On the other hand, the opening price of a share is the equilibrium price at which a stock is traded for the first time on a particular day.