What is LTP?
The full form of LTP is the Last Traded Price. LTP is the most recent price in a futures contract at which a security or asset was bought or sold in the market. It represents the value of a stock, bond, or other financial instrument at the last recorded transaction. The timing of LTP depends on market liquidity. It could be recorded just seconds ago or even a day earlier depending on how actively the market was trading at that specific time. LTP serves as an important instrument to reflect the current value of an asset or stock that further helps investors to make informed decisions, and is used to track current market trends and performance.
How is LTP Calculated?
The Last Traded Price (LTP) is calculated based on the most recent trade executed in the market. It is calculated in real time and is displayed on trading screens against the specific security being traded. LTP changes with each transaction, making it relevant only for the current trading session or day. The frequency of LTP updates depends on market liquidity. In a highly liquid market, securities are traded frequently, sometimes multiple times per second. In a liquid market, the difference between the bid and ask prices is minimal, reflecting the true market price more accurately. In an illiquid market, trades occur infrequently, resulting in a wider price range. This can make price discovery challenging, as the LTP may not accurately reflect the true market price. Factors to consider during LTP calculations include:
- Time of Trade: LTP reflects the most recent change in the price of a stock that happened a few seconds ago or even a day ago.
- Trade Execution: Trade is executed when a buy and sell order matches in the market. This matched price becomes the new LTP.
- Market Updates: LTP changes with each new transaction that shows the most recent price at which an asset was bought or sold, further reflecting how financial exchanges or trading platforms continuously keep updating.
- Market Liquidity: In highly liquid markets with frequent trading, the LTP is updated often. In less liquid markets, the LTP might remain unchanged for longer periods if there are fewer trades.
How is LTP Different from Market Price and Closing Price?
Last Traded Prices (LTP):
- The price at which the most recent trade occurred. It is often displayed in the last column of the market or on the depth of the market.
- LTP changes with each new transaction and can vary depending on market liquidity. In illiquid markets, trades are infrequent and can occur over a wide price range, making the LTP less reflective of the current market price.
- It provides the most recent price but is mainly relevant during the trading day.
Market Price:
- It refers to the current price at which a security or asset is available for buying or selling in the market.
- Market Price reflects the price at which transactions are occurring at the moment, which may align closely with the LTP if trading is active.
- It represents the real-time price and may differ from the LTP, especially in less liquid markets.
Closing Price:
- The closing price is the final price at which a security is traded at the end of the trading day. It is established once trading ends for the day, and it becomes the last traded price for that day.
- It is fixed at the end of each trading day and is used as a reference for daily performance.
- It is used for daily performance tracking and historical comparisons.
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