What Is LTP in the Stock Market?

Compare the LTP to previous prices to see the direction of the stock.

Compare the LTP to previous prices to see the direction of the stock.

Stock trading involves the use of jargon, abbreviations and insider terms. They take time to learn, but once you know them, financial articles and information will make more sense. LTP is one of those abbreviations, standing for "last traded price." The last traded price tells you a lot of information about a stock, cluing you in to the stock's most recent value and where it may be heading.

Last Trade Price

Throughout the day a stock's price is always fluctuating. The LTP is the price at which the most recent trade occurred. When the stock market is open -- the New York Stock Exchange is open Monday through Friday 9:30 a.m. to 4 p.m. Eastern Time -- the LTP provides the most up-to-date value of a stock. Once the stock market closes, the closing price is the best gauge of value until the stock market opens the next business day.

Bid and Offer

In order for a trade to occur, creating a LTP, there must be traders and investors actively willing to trade the stock. Both buyer and seller are required to complete a transaction. Buyers place bids in the market, specifying how much they wish to buy and at what price. Sellers post an offer, also called an "ask," stipulating how much they want to sell and at what price. Whenever a buy and sell order come together at the same price, a LTP is created.

Price Movement

The price of a high-volume stock moves when enough trades go through at the bid or offer to clear out all the orders at that level. For example, if someone buys 500 shares of a stock when it is priced at $10 and then buys 100 shares at $10.01, the the price has moved up. The LTP tells you which direction the price is moving in real time. When the LTP is rising the stock is going up, when the LTP is dropping, so is the stock.

Placing Orders

The LTP is the price at which the most recent transaction took place, but you may not get the same price if you buy or sell the stock a minute later. Place a market buy order and you'll get the nearest offer price; place a market sell order and you'll get the nearest bid price. Market orders are guaranteed to execute, but you don't know at what price since the bid and offer price can constantly change. Using a limit order, you specify the price at which you are willing to buy or sell. With a limit order you know exactly what price you will get, although there is no guarantee someone else will fill your order.

Photo Credits

  • Thinkstock Images/Comstock/Getty Images