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Last Traded Price (LTP) is one of the most crucial real-time metrics to know. It represents the exact price at which the stock’s last transaction was executed on the stock exchanges. Unlike the closing price, LTP offers an immediate snapshot of the current market value and the balance between demand and supply.
A stock's liquidity significantly influences its LTP, with high volume typically leading to steadier price movements. Understanding this process is essential for any trader relying on live market data.
Key Takeaways
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LTP indicates the most recently executed trade on the Exchange.
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Bid-ask matching decides on the traded price in real time.
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High liquidity promotes steadier LTP movements.
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LTP differs from the closing price, which is a calculated average.
What is the Last Traded Price (LTP)?
In the stock market, which comprises Buyers and Sellers, trading of shares only occurs if Buyer and Seller agree on a common price. For both parties, this price represents an acceptable market value at that specific moment. Finally, when both agree on a price and trade occurs, this price is taken to be the last traded price of that share.
Read more about What is LTP in Share Market?
Importance of the Last Traded Price
During live trading, the last traded price is an important factor used to determine the current market value of a stock. It represents the current demand-supply balance and provides a real-time representation of the price at which actual trades are taking place.
Since many market players use LTP to watch short-term price fluctuations, it is frequently used as a reference point for placing fresh bid and ask orders. In addition, numerous order types, such as market orders, are executed around the current LTP, making it an important indication for intraday and short-term choices.
How is LTP calculated?
For every stock market trade to occur, it must consist of these three participants:
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Bidders looking to buy a stock
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Sellers looking to sell a stock
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The Exchange that facilitates the trade
During the trading hours of the market, the current owner of the shares offers a selling price, also called the ask price, whereas there are also individuals looking to buy the stock with a bid price. The Exchange, as the third party, only allows the trade to occur when the ask price and bid price match. The price at which the trade has occurred becomes the basis for the LTP calculation for that particular time.
We can try to understand this with an example, let's say a seller wants to sell a stock of company A for ₹1000. Thus,
Ask Price: ₹1000
A buyer wants to buy a stock at the maximum price, and he may be willing to pay ₹950. Thus,
Bid Price: ₹950
But since the Ask and Bid prices differ, no trade occurs at this time. But later in the day, a new seller enters the market, willing to sell the stock at ₹950. Thus,
New Ask Price: ₹950.
Since the second price is the one at which trade successfully occurs, it is known as the traded price.
Thousands of trades can occur in the stock market during the whole trading session. Therefore, for highly liquid stocks, their trade prices fluctuate with demand and supply. Here, the price at which the stock is last traded is the last traded price or the LTP of the stock.
How is LTP determined?
LTP is determined each time an actual trade is executed on the Exchange. During trading hours, buyers put in bids and sellers place asks. A trade occurs when the price and quantity of a bid match those of the ask. The exchanged price becomes the new LTP.
If no trades occur for an extended period of time (for example, in a low-liquidity stock), the LTP remains constant until the next transaction. Every time a transaction is performed, LTP updates immediately, representing live market activity without averaging or delay.
This process continues throughout market hours, with each successful match between bid and ask resulting in an updated LTP. For highly liquid stocks, this can change within seconds due to frequent trades, while for low-liquidity stocks, the LTP may remain unchanged for longer periods.
Effect of Volume on the LTP
A share's liquidity in the market can play a crucial role in determining a stock's volatility. If a stock were to be traded in significant volume at a particular price in such a scenario, the closing price tends to be more stable. Thus, sellers tend to sell their stocks much closer to the ask price, and similarly, buyers are more likely to bid near the actual bid.
In cases where the liquidity of a stock is low, it becomes considerably more difficult for a buyer and seller to get a bid/ask price they may have wanted. If a trade occurs, there is always a possibility that the price at which they buy or sell is very different from the intrinsic price they may associate with that particular stock.
Read more about Volatile Stocks - How to Find Them?
Difference Between the Closing Price and the Last Traded Price
While we might think the last traded price should be the same as a stock's closing price, this is not always the case. The closing price is the weighted average of all prices at which the stock traded during the last 30 minutes of the session (from 3:00 pm to 3:30 pm).
But there is a possibility of a situation where the Last Traded Price can be the same as the closing price when there has been no trade occurring in the last half an hour, in a scenario, the last traded price becomes the closing price for that particular session. But understanding LTP is crucial as LTP tends to act as a base price for ask and bid price for stocks people may be willing to trade for one particular stock.
Conclusion
The Last Traded Price (LTP) serves as the real-time heartbeat of the market, representing the most recent consensus between a buyer and a seller. While it cannot predict future trends, it provides an essential snapshot of a stock's current value and liquidity.
By monitoring LTP, traders can gauge immediate market sentiment and execute orders with greater precision. Ultimately, understanding this metric ensures that your trading decisions are grounded in the latest live market data rather than delayed estimates.
