Share Market Knowledge Part - 7

Glimpse: This section explains the essential price and volume data used by investors, intraday traders, technical analysts and automated trading systems. Understanding these terms is particularly important when reading stock charts, developing trading strategies and analysing NSE and BSE securities.

 

141. LTP — Last Traded Price

Meaning: LTP stands for Last Traded Price. It is the price at which the most recent trade in a security was executed.

How it works: Whenever a buy order matches a compatible sell order, a transaction takes place at an execution price. That price becomes the LTP until another trade occurs.

Use in the Indian share market: Traders use LTP to monitor the latest traded price, compare it with support and resistance levels, and evaluate whether a stock is moving towards a potential entry or exit level.

Practical example: Suppose a stock's previous trade occurred at ₹245.50. A new transaction takes place at ₹246. The new LTP becomes ₹246.

Important distinction: LTP is not necessarily the best buying price or best selling price. The bid and ask prices may be different, and the LTP may not represent the price available for an order of your desired size.

142. Opening Price

Meaning: The opening price is the price at which a security begins trading for the relevant trading session under the exchange's opening mechanism.

How it works: On Indian exchanges, the opening price for eligible equity securities is generally determined through the opening call-auction process, subject to applicable exchange rules. The opening price can differ from the previous session's closing price because of overnight news, global markets, company announcements and changes in investor expectations.

Use in the Indian share market: Traders compare the opening price with the previous close to identify opening gaps and assess early market sentiment.

Practical example: A stock closes at ₹500 on Monday and opens at ₹515 on Tuesday. The stock has opened ₹15 higher than its previous close.

Calculation:

Opening Gap %=Open-Previous ClosePrevious Close×100

In this example, the opening gap is (3%).

Important point: A gap-up opening does not guarantee that the price will continue rising. Sellers may enter the market after the opening, causing the price to decline.

143. Closing Price

Meaning: The closing price is the official closing reference price for a security for a particular trading session, determined under the exchange's applicable rules.

How it works: The official closing price is determined using the exchange's prescribed methodology. For many actively traded equities, this can involve a closing-session calculation based on trading activity during a specified period rather than simply taking the last transaction of the day.

Use in the Indian share market: Investors use closing prices to calculate daily returns, study historical trends, compare sessions and evaluate end-of-day trading signals.

Practical example: A stock's previous official close was ₹800 and its current official close is ₹816.

The stock has gained 2% based on the two closing prices.

Important distinction: The official closing price may differ from the LTP recorded near the end of the trading session.

144. OHLC — Open, High, Low and Close

Meaning: OHLC stands for Open, High, Low and Close. These four values summarise a security's price behaviour over a specified period.

How it works:

• Open: The opening price for the period.

• High: The highest traded price during the period.

• Low: The lowest traded price during the period.

• Close: The closing price for the period.

OHLC data can represent a one-minute candle, a five-minute candle, a daily session or another time interval.

Use in the Indian share market: Technical analysts use OHLC data to identify trends, candle patterns, breakouts, reversals, support, resistance and volatility.

Practical example: A five-minute candle has the following values:

Price field	Value
Open	₹200
High	₹205
Low	₹198
Close	₹204

The candle closed above its opening price, indicating that the price finished the interval higher than it began.

Important point: One bullish candle alone does not confirm a sustained uptrend. Traders should also consider volume, market structure, the broader trend and nearby price levels.

145. Candlestick

Meaning: A candlestick is a chart representation that displays the open, high, low and close prices of a security over a specified time interval.

How it works: Each candle has a body and may have upper and lower wicks, also called shadows.

• The body represents the difference between the opening and closing prices.

• The upper wick indicates how high the price traded during the interval.

• The lower wick indicates how low the price traded during the interval.

• A bullish candle closes above its open.

• A bearish candle closes below its open.

Use in the Indian share market: Traders study candlesticks to understand price behaviour and identify patterns such as doji, hammer, engulfing patterns and shooting stars.

Practical example: If a five-minute candle opens at ₹300, falls to ₹296, rises to ₹307 and closes at ₹305, it has a bullish body with both upper and lower wicks.

Important limitation: Candlestick patterns are not guarantees of future price direction. Their usefulness depends on context, including trend, location, volume and the trader's confirmation rules.

146. Trading Volume

Meaning: Trading volume is the quantity of shares or contracts traded during a specified period.

How it works: Each completed trade contributes to reported trading volume according to the relevant exchange's reporting conventions. Volume can be measured over one minute, five minutes, one day or a longer period.

Use in the Indian share market: Traders use volume to evaluate participation, compare activity with historical averages and assess whether a price movement is accompanied by increased trading.

Practical example: A stock typically trades 100,000 shares per day. On a day when it breaks above a resistance level, its volume reaches 300,000 shares. The higher activity may indicate stronger participation, but it does not independently confirm a successful breakout.

Practical research point: Compare current volume with a suitable historical baseline, such as the average volume for the same time of day. Morning volume is often naturally different from afternoon volume.

Important distinction: Volume counts traded quantities; turnover measures the monetary value of trades.

147. Average Trading Volume

Meaning: Average trading volume is the average quantity of a security traded over a defined number of periods.

How it works: It is commonly calculated by adding the volumes for a selected number of trading sessions and dividing the total by the number of sessions.

Formula:

Average Volume=i=1NVolumeiN

Here, (N) represents the number of periods included in the calculation.

Use in the Indian share market: Traders use average volume to identify unusually active stocks, assess liquidity and build volume-based screening rules.

Practical example: A stock trades 80,000, 100,000, 120,000, 90,000 and 110,000 shares over five sessions.

Its average daily volume is:

If the next session records 250,000 shares, the volume is 2.5 times the five-session average.

Important point: A volume spike may result from positive news, negative news, index rebalancing, corporate actions or speculative activity. Interpret it alongside price action and relevant announcements.

148. Trading Turnover

Meaning: Trading turnover is the monetary value of securities traded during a specified period, calculated according to the applicable market-data convention.

How it works: For a simple stock transaction, turnover is commonly calculated by multiplying the traded quantity by the execution price. Aggregate market turnover is the sum of qualifying transaction values for the relevant period.

Formula:

Turnover=Quantity Traded×Trade Price

Use in the Indian share market: Investors and analysts use turnover to assess trading activity, compare liquidity and understand the scale of transactions.

Practical example: If 50,000 shares are traded at an average price of ₹200, the associated transaction value is:

That is ₹1 crore of turnover under this simplified calculation.

Important distinction: Turnover is not the same as a company's revenue, profit or market capitalisation. It represents the value of trading activity under the relevant calculation method.

149. VWAP — Volume Weighted Average Price

Meaning: VWAP stands for Volume Weighted Average Price. It is the average traded price weighted by the quantity traded at each price during a specified period.

How it works: Unlike a simple average of prices, VWAP gives greater weight to prices at which more shares were traded.

A common calculation is:

VWAP=Price×VolumeVolume

The precise price input used in the calculation may vary by platform or data source.

Use in the Indian share market: Intraday traders often compare the current price with VWAP to assess whether a stock is trading above or below its volume-weighted average for the session. Institutions and execution analysts may also use VWAP as a benchmark.

Practical example: Suppose 1,000 shares trade at ₹100 and another 3,000 shares trade at ₹102.

The VWAP is ₹101.50.

Interpretation: A stock trading above VWAP may indicate intraday strength relative to its session average, while a price below VWAP may indicate relative weakness. Neither condition guarantees the next price movement.

Important point: VWAP commonly resets each trading session. It is different from moving averages such as the 20-period EMA, which use a different calculation.

150. Relative Volume (RVOL)

Meaning: Relative volume, commonly abbreviated RVOL, compares current trading volume with a reference volume level.

How it works: A common version divides current volume by average volume. Other implementations compare volume with the typical volume at the same time of day, which can be more useful for intraday analysis.

Formula:

RVOL=Current VolumeReference Average Volume

Use in the Indian share market: Traders use RVOL to find stocks receiving unusually high or low trading activity compared with their baseline.

Practical example: If a stock has traded 500,000 shares by a particular time and its reference volume for that time is 250,000 shares, its RVOL is 2.0.

This means its volume is twice the selected reference level.

Interpretation:

• RVOL above 1: Volume is above the reference level.

• RVOL around 1: Volume is near the reference level.

• RVOL below 1: Volume is below the reference level.

Important limitation: RVOL depends on the reference period and calculation method. A high reading shows unusual activity, not whether the activity is bullish or bearish.

151. Price Band

Meaning: A price band is a range of permitted or restricted price movement established under the applicable exchange or market rules.

How it works: Depending on the security and relevant trading framework, a price band can limit the prices at which orders may be accepted or trades may take place during a session. Different securities and market segments can have different arrangements.

Use in the Indian share market: Traders monitor price bands to understand trading restrictions and identify securities approaching an applicable price boundary.

Practical example: Suppose a stock has an applicable lower price boundary of ₹90 and an upper boundary of ₹110 for the session. Trading is constrained by those limits under the applicable rules.

Important point: The example is illustrative. Actual price bands depend on the security, exchange, segment and current rules. A price band is not a forecast of where the stock should trade.

152. Upper Circuit

Meaning: An upper circuit is the applicable upper price limit reached by a security when its price rises to the maximum permitted level under the relevant trading restrictions.

How it works: When a security reaches its upper price limit, further trading is constrained by the applicable rules. Depending on the order book, there may be substantial buying interest and few or no willing sellers at that price.

Use in the Indian share market: Traders monitor upper circuits to identify securities experiencing strong buying pressure or restricted price movement.

Practical example: A stock has a hypothetical upper price limit of ₹120. If the price reaches ₹120 and buy orders remain while sellers are unavailable, an investor may find it difficult to buy shares at that price.

Risk consideration: A stock reaching upper circuit does not guarantee future gains. It may later decline, and buying near the upper limit can expose traders to sharp reversals when trading conditions change.

153. Lower Circuit

Meaning: A lower circuit is the applicable lower price limit reached by a security when its price falls to the minimum permitted level under the relevant trading restrictions.

How it works: At the lower limit, trading is constrained according to the applicable rules. If many sellers want to sell but buyers are unavailable at acceptable prices, an investor may be unable to exit a position immediately.

Use in the Indian share market: Traders use lower-circuit information to understand downside trading restrictions and liquidity risks.

Practical example: A stock has a hypothetical lower price limit of ₹80. If it reaches ₹80 and a large number of sell orders remain unmatched, an investor holding the stock may be unable to sell immediately.

Risk consideration: A stop-loss instruction cannot guarantee execution at the desired price if the security becomes illiquid or trading is constrained. Position sizing and liquidity checks are therefore important before entering a trade.

154. Circuit Filter

Meaning: A circuit filter is a price-movement restriction applied to a security or market under the applicable exchange rules. The term is commonly used when discussing individual-stock price limits.

How it works: A security may have a prescribed permissible price range. The relevant trading system enforces applicable restrictions, subject to the security's category and current rules.

Use in the Indian share market: Investors use circuit-filter information to understand how far a stock's price may move within the applicable session and whether an order could be restricted.

Practical example: If a stock's permitted trading range is ₹190–₹210 for the session, an order outside the applicable range may be rejected or otherwise handled according to the exchange's rules.

Important distinction: Individual-stock price bands and market-wide index circuit breakers are not the same mechanism. Their triggers, scope and consequences differ.

155. Market-Wide Circuit Breaker

Meaning: A market-wide circuit breaker is a mechanism intended to manage extreme movements in broad market indices and provide a coordinated interruption to trading under prescribed conditions.

How it works: India's market-wide circuit-breaker framework uses specified movements in designated benchmark indices, including the Sensex and Nifty 50, as triggers under the applicable rules. The framework prescribes trading halts and other procedures at specified thresholds.

Use in the Indian share market: Market-wide circuit breakers help manage exceptional market conditions and provide a structured response to extreme broad-market movements.

Practical example: If a designated benchmark index reaches a prescribed circuit-breaker threshold, trading may be halted according to the applicable framework.

Important distinction: A market-wide circuit breaker is different from an individual stock's upper or lower circuit. The current thresholds, timing and halt procedures should be verified from official NSE, BSE and SEBI materials.

156. Tick Size

Meaning: Tick size is the minimum permitted price increment for a security or contract under the applicable exchange rules.

How it works: Orders must use valid price increments. For example, if a security has a tick size of ₹0.05, valid prices may include ₹100.00, ₹100.05 and ₹100.10, while ₹100.03 would not be a valid price increment for that security.

Use in the Indian share market: Tick size affects order placement, bid-ask spreads and the precision of trading algorithms.

Practical example: A trader wants to place a limit buy order at ₹250.03, but the applicable tick size is ₹0.05. The trader must select a valid price increment permitted by the trading system.

Important point: Tick sizes can differ among securities and market segments and may change under applicable exchange rules. Trading software should obtain or validate the correct tick size rather than assuming a universal increment.

157. Lot Size

Meaning: Lot size is the specified quantity of units that constitutes one lot for a security or contract where trading is organised in lots.

How it works: In derivatives markets, contracts generally specify the permitted contract quantity or lot size. The number of units represented by a contract depends on the instrument's specifications.

Use in the Indian share market: Traders use lot size to calculate contract exposure, margin requirements, potential profit or loss and the quantity that can be traded.

Practical example: Suppose a futures contract has a lot size of 500 units and the quoted price is ₹200 per unit.

The notional contract value is ₹1 lakh before considering margin, charges and other requirements.

Important distinction: Lot size is not the same as the minimum price increment, or tick size. The former concerns quantity; the latter concerns price.

Practical caution: Derivatives lot sizes can change. Verify the current contract specifications before placing a trade.

158. Previous Close

Meaning: Previous close is the official closing price of a security from the preceding trading session.

How it works: Traders use the previous close as a reference point for evaluating the next session's opening gap, daily percentage change and price movement.

Use in the Indian share market: It is a key input for chart analysis, market scanners, daily return calculations and trading strategies.

Practical example: A stock's previous close was ₹400, and its current price is ₹412.

Change %=412-400400×100=3%

The stock is up 3% relative to the previous close.

Important point: Make sure that the previous close comes from the correct trading session and data source. Corporate actions, adjusted historical data and differing price fields can affect comparisons.

159. Price Change

Meaning: Price change is the difference between a security's current or reference price and another price, such as the previous close.

How it works: Price change can be expressed in absolute currency terms or as a percentage.

Formulas:

\[ \text{Absolute Change}= \text{Current Price}-\text{Reference Price} \]

\[ \text{Percentage Change}= \frac{\text{Current Price}-\text{Reference Price}} {\text{Reference Price}}\times100 \]

Use in the Indian share market: Traders use price change to monitor market movement, rank stocks by daily performance and create gainers-and-losers lists.

Practical example: A stock moves from ₹250 to ₹260.

• Absolute change: ₹10

• Percentage change: 4%

Important distinction: Percentage change depends on the chosen reference price. A stock's change from the previous close can differ from its change from today's opening price or from a trader's entry price.

160. Price Gap

Meaning: A price gap occurs when a security opens or trades at a price significantly different from a preceding reference price, leaving a gap between price levels on a chart for the relevant time interval.

How it works: Gaps can arise from overnight news, earnings announcements, global market movements, regulatory developments, corporate actions or changes in investor expectations.

Common types:

• Gap up: Price opens above the previous reference level.

• Gap down: Price opens below the previous reference level.

• Breakaway gap: A gap associated with a potential move out of a trading range or chart pattern.

• Runaway gap: A gap occurring during an established trend.

• Exhaustion gap: A gap that may occur late in a trend and can sometimes accompany a reversal.

Use in the Indian share market: Traders study gaps to evaluate opening volatility, momentum, potential support or resistance and risk-management requirements.

Practical example: A stock closes at ₹700 and opens the next session at ₹728 after announcing strong results. This is a gap-up opening of ₹28, or 4% relative to the previous close.

Important limitation: Not every gap gets filled. A gap may remain open for a long time, and gap-based strategies require defined entry rules, stop-loss conditions and realistic execution assumptions.