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For beginners, the world of the stock market can be perplexing. “CMP” is one of the terms you may have encountered while doing stock research. We will go into more detail about CMP in this post and discuss why it is crucial for anyone wishing to invest in the stock market.
What is CMP in stock market?
The full form of CMP in stock market is current market price. It is the price at which the stock is traded on the open market. At that certain time, the price can be used to buy or sell that share. Additionally, the stocks’ market value fluctuates over time and is never constant. The stock’s current worth will not be the same after an hour or two. CMP is usually taken into account because of this. As a result, the CMP is the most important factor that investors consider.
Additionally, the CMP is established using a variety of criteria. These could include supply and demand, business performance, the state of the economy, sentiment in the market, etc. However, the present market price of the stock will fluctuate over time due to the unpredictability of all the components.
Importance of CMP
The main benefit of CMP (Current Market Price) is that it provides investors with real-time access to market value data, enabling them to act more intelligently and take advantage of opportunities as they present themselves.
- Helps in the valuation of the market
CMP is useful in determining a company’s market worth. For example, the market capitalisation of “Company A” would be ₹200 million if its CMP is ₹200 and it has one million shares outstanding.
- Investment decisions
Investors use CMP as a benchmark when purchasing or disposing of shares. For instance, an investor may view “Company B” as a favourable investment opportunity if they believe its intrinsic worth to be higher than the CMP.
- Stock Comparison
Investors can compare various equities within the same industry by using CMP. Investors who are concerned about price may find “Company C” more enticing if it is in the same industry as “Company D” and has a lower CMP.
How to find the current market price (CMP)?
A number of websites, including NSE, BSE, Moneycontrol, Business Standard, Economic Times, etc., display the current market price of any stock. Additionally, traders have easy access to our trading platform, Shree Varahi, via which they may view the CMP and execute transactions.
Furthermore, the trader can easily look for the current market price and the last traded cost of a stock by knowing which stock he wants to trade, which will help him learn about the CMP of that stock.
What is the difference between CMP and LTP?
| Criteria | Current Market Price (CMP) | Last Traded Price (LTP) |
| Meaning | The price at which a security is currently being traded in the market. | The price at which the last transaction for a security occurred. |
| Basis of Calculation | Derived from the ongoing supply and demand dynamics in the market. | Based on the most recent transaction of the security. |
| Frequency of Update | It may fluctuate frequently as market conditions change. | Updated continuously during market hours as transactions occur. |
| Time Sensitivity | Reflects the latest valuation of the security in real time. | Represents the price of the most recent transaction, which could be seconds or minutes ago. |
| Importance in Trading | Considered significant for assessing the current market sentiment and making trading decisions. | Provides insight into recent trading activity but may not always reflect the prevailing market conditions. |
| Usefulness for Investors | Helps investors gauge the current value of their investments and make informed decisions. | Useful for short-term traders looking to capitalise on immediate price movements. |
| Influence on Orders | It can influence the execution of pending buy or sell orders in the market. | It may affect the decision-making process of traders but does not directly impact pending orders. |
| Availability of Information | Widely available through financial news platforms, trading terminals, and stock exchanges. | Accessible in real-time through trading platforms and stock market data providers. |
| Stability | Subject to frequent fluctuations due to changes in market sentiment and trading activity. | It may remain stable for short periods but can change rapidly during active trading sessions. |
What is limit order?
When a trader enters an order to buy or sell a stock at that certain price, it is referred to as a limit order. However, the key is to understand how it can be implemented. Only at the limit price or less can a buy or purchase limit order be fulfilled.
Concurrently, a sale limit order will be fulfilled at the limit or a rate higher than the limit. The traders will have better control over the prices of their orders in this way.
Additionally, keep in mind that a limit order is only valid for that specific trading day. Once the trading day is over, the broker will cancel all pending orders. So, if your limit order is cancelled at the end of the trading day, you can alter the price or even place a new limit order the following trading day, similar to the CMP adjustments.
Market order meaning
The market order is what happens when a trader chooses to buy or sell a stock at the going rate. However, these transactions frequently happen right away and don’t require a lengthy wait. Consequently, there is a decreased likelihood of orders being cancelled. Similar to limit orders, there are two forms of market orders: buy and sell.
Furthermore, the price of the market order at the time the order is placed, however, is what’s crucial to keep in mind. Due to the frequent fluctuations in market price, there is a chance that the share’s market price will fluctuate between the time the order was made and the time it was executed. Apart from that, in the event that more shares are purchased or sold, there will be a significant difference.
What is stop loss order?
In order to hedge against potential losses in the situation of a sharp decline in the stock price, traders typically issue stop-loss orders. However, the stop-loss order can be set with the broker after the trader buys or sells the share. Moreover, by placing a stop loss, a trader protects himself against any loss resulting from an abrupt shift in the market.
The bottom line
The price of stock that is now available for trading is known as the current market price. Moreover, it facilitates investors’ comprehension of the stock’s trading activity on the stock exchange. The Last Traded Price (LTP), trade volume, stock liquidity, and general market mood all influence the CMP. Nevertheless, a stock’s CMP and LTP are not the same. Based on a stock’s CMP, three different kinds of trading orders are placed: market, limit, and stop orders.
FAQs
The acronym for “Current Market Price” is CMP. It speaks about the price at which a security or share is now trading on the stock market. It displays the current price at which a particular stock or financial instrument is being purchased or traded.
To decide whether to purchase or sell, traders utilise CMP. For example, a trader may choose to purchase a stock if they believe it will increase in value in the future and the CMP is less than their estimate.
The present price on the market for which a futures contract or an option can easily be purchased or sold is referred to as the CMP in futures and options (F&O).
The trader can utilise the websites of the NSE and BSE to find the CMP of any stock.
An order with a broker to buy or sell a certain stock when it hits a predetermined price is known as a stop-loss order. The purpose of a stop-loss is to restrict an investor’s loss on a holding in a security. For instance, you can restrict your loss to 10% if you place a stop-loss order 10% below the cost you paid for the stock.