What is LTP in the Share Market?

Importance of LTP in the Share Market?

The Last Traded Price (LTP) is a key indicator for tracking live market behaviour. It provides an instant snapshot of what value the market has assigned to a stock based on the most recent transaction. For traders, LTP is crucial for placing real-time buy and sell orders and adjusting strategies based on live price action. 

It also reflects current market sentiment—rising LTPs often signal increased buying interest, while falling LTPs suggest selling pressure. Moreover, the LTP acts as a reference point for evaluating trends, making it an essential input in intraday and short-term trading strategies.
 

LTP Strategy in the Market

The LTP of a share is the closing price of the share for a particular day. The LTP is also known as Today's Price and Today's Quote or Today's Price and Today's Value.

Value of LTP in the Share Market

A stock can be thought of as an option to buy the company. The choice may not be worth very much, especially if it's a small company or a risky one. But over the long run, it will tend to get more valuable.

The reason is that companies don't live forever; eventually, they go out of business, and their assets (cash, factories, patents) get bought up by some other company. If you own the stock, you are in line to receive some of that money when the company is bought or goes public.

This is more likely to happen if it is a more prominent company. For example, if you own shares in Microsoft, someone will likely come along and give you money for them someday -- even if you never sell them. A share of Microsoft doesn't give you any right to buy or sell anything; what you own is a share of ownership in the company itself.

The last traded price represents the price at which someone was willing to bet that the company would be worth something in the future.

Unless you're a financial professional, you probably don't know this, but the last traded price is not the price at which the stock is sold. It's just an approximate indication of where the market stands on any given day.

The actual sale is almost always at a different price.

The difference can be slight (for example, if you buy 1,000 shares of Microsoft, the sale will be for $26 per share), or it can be significant (if you buy 100 shares of some penny stock).

The reason for this is simple economics. When you buy 100 shares of Microsoft, no one wants to sell their whole position at the same price as the market price -- if they were willing to do that, they could go into an exchange themselves and sell it there without paying commissions.

The sellers are also not indifferent about who they sell to. They prefer to sell to someone who knows what they're doing and doesn't want to mess with them for a lower price than they think it's worth. And so they wait until someone appears who's willing to pay more than the last traded price before they sell.

Volume of Trading of LTP in The Share Market

Trading volume at the LTP refers to the number of shares exchanged at that specific price point. It helps determine the strength or reliability of the LTP as a market indicator. High trading volume at a particular LTP suggests a strong level of market interest and liquidity, making it easier for investors to execute trades with minimal price distortion. 

On the other hand, low volume may indicate limited participation and potential volatility. Monitoring volume alongside LTP helps traders assess whether a price level has sufficient support or resistance, which is vital for making informed trading decisions.
 

What is the Effect of LTP on Stock Prices?

The standard theory about how markets work is that they are efficient - that is that they quickly and accurately incorporate all available information into the price at which the stock trades. But if this were true, why should there be any relationship between the last business and the average trade?

We could understand this if we assumed that investors don't or can't analyze all available information or believed they don't know how to weigh different kinds of data properly. Then we could say that what investors get from their experience with other stocks and their familiarity with the companies involved here would be reflected in what they already knew about what other investors were thinking.

They wouldn't need anything new from the company because they would already have it from their experience with similar situations. An individual investor can't usually buy or sell millions of shares of a company's stock at once but instead must trade it in small pieces.

The process by which one individual sells his share and another buys it is called market-making and is necessary for an orderly functioning market.

Why is the Last Traded Price Not Equal to the Intrinsic Value?

The Last Traded Price (LTP) reflects the market’s most recent valuation based on current supply and demand, not a company’s actual worth. Intrinsic value, in contrast, is derived through financial analysis, considering future earnings, cash flow, and business fundamentals. 

Market sentiment, news, investor behaviour, and liquidity can cause the LTP to differ significantly from a stock’s intrinsic value. As a result, while the LTP offers a useful gauge of live trading conditions, it may not represent whether a stock is genuinely undervalued or overvalued in fundamental terms.
 

Difference between closing price and LTP

Definition:

• LTP: The price at which the last transaction of a stock occurred during a trading session.
• Closing Price: A weighted average of stock prices during the final 30 minutes of trading.

Timing:

• LTP: Changes constantly throughout the day.
• Closing Price: Calculated at the end of the trading day.

Purpose:

• LTP: Used for real-time trading decisions.
• Closing Price: Used for reporting, portfolio valuation, and end-of-day analysis.

Volatility:

• LTP: More reactive and volatile.
• Closing Price: Smoother, representing average activity.

Availability:

• LTP: Visible instantly on trading platforms.
• Closing Price: Available after end-of-day processing.
   

Review of LTP in Share Market

The last traded price in the stock market is paramount for investors to know. This can be used as an information source to determine the trend of the market.

It is necessary for the investors to know the current rate of the stocks, whether it's going up or down. This should be the first thing that they need to know about their stocks. Many factors affect the rates of stock prices. An investor should appropriately consider these factors before buying or selling them.

The last traded price in the stock market may vary from time to time according to the market conditions. Investors should also keep track of these fluctuations so that they can make the best use of them.

They should never forget that they should not take any hasty decision about their stocks based on this price change alone because it may be caused by other factors too which may have no connection with the company's performance.

The current price of a stock is what you will get if you sell now. This sounds like it should be easy to find out; look at the last trade, and see how much it was. But how do you know what the last trade was?

What if it was a prearranged sale, or a stock split, or an error? If you have been watching closely enough to know all this, why are you selling now?

The last traded price in a stock market is a story that gets told after the fact.

Wrapping Up

The last traded price, also known as the closing price, is a number that represents how much security was trading for at the end of a specific period. This includes stocks, options and other tradable securities. The closing price is calculated in real-time. It is not an average of previous trades in a day or a week. Instead, it reflects the last trade in a particular security.