Understanding Price

"Tags: price, LTP, OHLC, percentage change, tick size Prerequisites: What Is the Stock Market?, How Do Stock Prices Move? Price is the amount at which ownership changes hands. It is a transaction record, not a guarantee of value. Questions this article answers What does the price shown on a trading screen actually mean? What is the difference between price and value? What are open, high, low and close? Why is percentage change often more useful than rupee change? 1. The simplest definition of price The market price of a share is the amount at which a buyer and seller most recently agreed to trade it. If a screen shows Rs 750, it usually means the latest completed transaction occurred near Rs 750. It does not mean every buyer can purchase unlimited shares at that exact price. The available quantity, bid-ask spread and speed of the market determine the actual execution price of the next order. 2. Last Traded Price (LTP) LTP means Last Traded Price. It is the price of the most recently completed trade on that exchange. LTP can remain unchanged even while unexecuted buy and sell orders are changing. It updates only when another trade occurs. In an illiquid stock, the last trade may have occurred several minutes earlier. Therefore, LTP may not represent the price at which a meaningful quantity can currently be bought or sold. 3. Price is not the same as value Price is observable. Value is an estimate. Two investors can see the same market price and reach different conclusions about value because they use different assumptions about growth, risk, time horizon and future cash flows. A trader may focus on whether price is strengthening or weakening. A long-term investor may compare price with an estimate of business value. Neither should treat the quoted price as proof that the asset is cheap or expensive. 4. Open, High, Low and Close (OHLC) For a selected timeframe, market platforms commonly display four core prices. Open: the first traded price during that period. High: the highest traded price during that period. Low: the lowest traded price during that period. Close: the final traded price or exchange-defined closing price for that period. For a daily candle, the period is one trading day. For a weekly candle, the four values summarise the entire week. The meaning of the numbers changes with the selected timeframe. 5. Previous close and daily change The previous close is the closing price from the preceding trading session, subject to exchange methodology and corporate-action adjustments. Daily change is usually calculated by comparing the current or closing price with the previous close. Percentage change = (Current price - Previous close) / Previous close x 100 6. Why percentage change matters A Rs 10 move has different meaning in different stocks. A move from Rs 100 to Rs 110 is a 10% rise. A move from Rs 2,000 to Rs 2,010 is only a 0.5% rise. Percentage change allows a fairer comparison across securities with different prices. 7. Absolute price does not tell you whether a stock is cheap A stock priced at Rs 25 is not automatically cheaper than one priced at Rs 2,500. The number of shares outstanding, business quality, earnings, debt and market capitalisation are among the factors that determine the economic scale and valuation of a company. Beginners should avoid using the words cheap and expensive based only on the price of one share. 8. Tick size Tick size is the smallest permitted price movement for an order in a particular market or security. If the tick size is Rs 0.05, valid order prices move in increments such as Rs 100.00, Rs 100.05 and Rs 100.10. Tick-size rules can differ by market segment and may be revised. The trading platform normally enforces valid increments automatically. 9. Adjusted and unadjusted prices Stock splits, bonus issues and some other corporate actions can change the numerical share price without creating or destroying business value by themselves. Chart providers may adjust historical prices so that the chart remains comparable across the event. A sudden historical price drop can therefore be a data-adjustment issue rather than a genuine market crash. 10. Price precision and false importance Beginners often attach too much meaning to tiny changes such as Rs 501.20 versus Rs 501.40. The importance of a move depends on volatility, timeframe, spread and trade plan. A few paise can matter to a high-frequency strategy but may be irrelevant to a multi-week swing trade. 11. Common beginner mistakes Treating LTP as guaranteed execution The next available price may be different, especially in a fast or illiquid market. Calling a low-priced share cheap Share price alone says nothing about total company value. Comparing rupee moves instead of percentage moves The same rupee change has different significance at different price levels. Ignoring corporate-action adjustments A chart can appear distorted if historical data is not adjusted consistently. Focusing on every small tick Noise becomes more important than the broader structure when the timeframe is forgotten. 12. DStreet principle Read price as evidence, not as a story. First establish what actually traded; interpretation comes afterward. 13. Beginner checklist I know that LTP is the latest completed transaction. I can identify open, high, low and close. I compare moves using percentage as well as rupee change. I do not call a stock cheap merely because its share price is low. I check whether chart data is adjusted for corporate actions. 14. Quick knowledge check Question: What does LTP mean? Answer: Last Traded Price. Question: Is LTP a promise that your order will execute there? Answer: No. Question: Why is a Rs 10 move more important in a Rs 100 stock than a Rs 2,000 stock? Answer: Because the percentage change is much larger. Question: What is the close? Answer: The final traded or exchange-defined closing price for the selected period. 15. Next lesson Understanding Volume explains how many shares changed hands and why activity must be interpreted together with price."