Last Updated on October 26, 2023 by BFSLTeam BFSLTeam
The prices of any asset that is traded in the secondary market are constantly fluctuating. If you sit down to track the price of a stock during a trading day, you’ll find that it changes almost every second (assuming the share is liquid and has a high trading volume). With prices changing so dynamically, placing an order at your preferred price point can be quite challenging.
Market orders will be executed at the prevailing market price, which could change rapidly between the time at which you place your order and the time at which it is executed. This could result in a great deal of slippage. On the other hand, limit orders will be executed at your preferred price — only if the market price reaches that level.
To place your orders at realistic price points, you need to know what the LTP or the last traded price is.
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LTP is the acronym for Last Traded Price and refers to the price at which the last trade was executed. The LTP for an asset keeps changing throughout the day with every executed trade based on the forces of demand and supply. Once the trading session ends, the last traded price becomes the closing price for the asset.
The Significance of Last Traded Price in the Stock Market
Now that you know the meaning of LTP, let’s look at how important it is for trading and investing.
- Price Movement Assessment
Monitoring the last traded price of an asset can help you predict the way the market is moving. For example, if the LTP of a stock moves from ₹100 to ₹110 in small increments of ₹2, it indicates an upward trend.
- Market Order Placement
Market orders are buy or sell orders that get executed at the current market price. The LTP gives you an idea of what the current market price for an asset is, enabling you to execute market orders more efficiently. However, it is essential to note that in volatile markets, there may be a sizable difference between the LTP and the price at which a market order gets executed.
- Investment Monitoring
The last traded price helps you track the performance of your portfolio. It gives you a fair idea of the current value of your investments in real time. This allows you to make well-informed investment decisions about rebalancing or adjusting your holdings.
The Correlation Between LTP and Trading Volume
The LTP in the share market shares a very close relationship with the trading volume. The trading volume is a metric that represents the total number of shares or units of an asset traded in a day.
If the trading volume for an asset is low, the LTP for the said asset generally moves a lot slower. Additionally, the bid and ask spread would also be wider, which may lead to sudden jumps in the LTP when a trade is executed.
On the other hand, if the trading volume for an asset is high, the LTP moves a lot faster along with the trade execution rate. Furthermore, the bid and ask spread also tends to be a lot tighter with a more linear progression in the LTP when trades are executed.
Also Read: Security Market Line
LTP in Action: How to Use the Last Traded Price to Make Smart Trading Decisions?
The LTP in the stock market, in conjunction with the trading volume, gives you deep insights into the price movements of an asset. You can use these insights to plan your trading decisions. Here’s a quick overview of how you can use them.
- LTP and Trading Volume Advances
If you witness the LTP of an asset and its trading volume trending upward, it may be a sign of a bullish trend. A bullish trend is the best market scenario for entering into long positions.
- LTP Advances and Trading Volume Declines
On the other hand, if the LTP trends upward but the trading volume declines, it may be a sign of a mild bullish trend. During such market scenarios, it is best to exercise caution since there might be a possibility of the trend reversing.
- LTP Declines and Trading Volume Advances
If the LTP trends downward and the trading volume increases, it may indicate a bearish trend. You may consider entering into short positions during a bearish trend.
- LTP and Trading Volume Declines
If both the LTP and the volume are moving downward, it may be a sign of a mild bearish trend with the possibility of a trend reversal. It is advisable to remain cautious and look for signs of reversal during such market scenarios.
Also Read: Closing Price
Conclusion
Monitoring the LTP in the stock market can give you some clarity on how the price of an asset is trending. That said, the last traded price is not a standalone indicator of price or market trends. It is always best to use it in conjunction with other technical indicators to get a clear picture of the direction in which an asset’s price is moving.
If you want to track the LTP of an asset, you can do so on the trading app of a trusted stock broker like Bajaj Financial Securities Limited. With real-time LTP tracking and a wealth of other essential market-related and stock-specific information, our trading app brings all the essential information to your fingertips, so you can make informed and well-planned trades.
