You must have heard or read on the television show, financial websites, etc. places the use of CMP by the stock markets guru. For new investors, this term may sound foreign but it is not. In this article, we will be learning about CMP and related topics with CMP.
1. What is CMP in the share market?
CMP full form is “Current Market Price”
CMP in the share market meaning it is the current market price or value of a share trading on the stock market. It is the rate at which an investor can buy or sell a share of a company currently trading on the market.
It is also important to understand that in the stock market the share prices fluctuate within a few micro-second so on the same lines CMP will also change. So it is the rough estimate of the current share price.
What is CMP in Zerodha? (Image)
From the above image, you can see the CMP of ITC is 203.30
Wasn’t it easy to understand?
2. Where to find CMP of a company?
As we understood this term CMP we also need to know where to find the CMP of a listed company on the stock exchange.
We can find CMP of quoted shares on various places such as financial websites, brokerages, news channels, etc.
CMP is not a fixed price it keeps on fluctuating during a trading day. So if you place a ‘market order’ at a particular price in your mind, it may not execute at the same price because of the fluctuations in the market.
This will usually happen if the stock is not liquid enough which in simple words means there is not sufficient buying or selling in the particular script.
This can also happen if the order quantity of your desired script is huge, in case of buying which can result in price increases and vice versa in the case of selling the shares.
The last reason can be the stock market sentiments, whether the stock market is bullish or bearish, which can also affect the buying and selling CMP of the particular stock.
Just learning about the term CMP is not enough, we need to understand this term with different order types and different terms related to it.
3. Type of orders with CMP
3.1 Market order
Market order simply means to place an order with a broker to instantly buy or sell shares at whatever current market price is trading at. Also, this price will fluctuate due to different factors already discussed such as order size, market sentiments, liquidity in the stock, etc.
This order is most likely will be executed near the current bid price (buy) or the offer price (sell). (can see bid price and offer price in the image above)
This type of order is usually used by long-term investors who do not care much about the current market price as their view is to hold shares for the long term.
Example on market order
If the stock is trading at ₹100 and you place a market order at that price and the present CMP is ₹100. It may get executed at ₹100, but it can also get executed at slightly different prices demanding on the order size.
This order may get executed at ₹99.99 or ₹100.05.
But when you place a ‘market order’ it will always get executed instantly, so keep in mind while placing this order that CMP will change with each share slightly demanding on the order.
3.2 Limit Order
When an investor places a limit order it means he is instructing the broker to buy or sell only at particular shares. So when you place a limit order it also means you are indicating the minimum buying price and maximum selling price to your broker.
This order also takes away the tension of price fluctuations in the CMP as the order will be executed at a particular price whatsoever.
Also if the share price rises or falls rapidly the limit order can get executed immediately because of the dynamic nature of the stock markets.
Example on limit order
Suppose I place a limit buy or sell order at ₹1000 per share for 100 shares and the current CMP is ₹1001.
So in this case the order will be executed in the case on the buy-side if the share price goes below ₹1000 per share and on the sell-side, the order will be executed only if the price rises above ₹1000 per share. The time limit can be also specified while placing this order.
Also if the stock does reach the desired CMP during the particular time the transaction can be carried forward to the next day.
But this type of carried forward order will result in extra charges charged by the broker, so be aware of these charges for the time limit indicated by you.
3.3 Stop Order
In this type of order as the name suggests an investor gives instructions to his broker to buy or sell shares if the stock price goes below or rises above the desired price.
For example, you can instruct your broker to buy a particular script if the price falls below ₹475 and sell the same if the price rises above ₹500.
Also, remember while placing the stop loss order if the share price increases or decreases rapidly the stop loss order may get executed immediately because the share prices keep on fluctuating every micro-second.
Example on stop order
If you want to have 100 shares of ITC at ₹210 each, want to stop your loss and sell them before it falls below ₹205.
You can put up a stop-loss order which will be executed if the share price of ITC falls below or equal to ₹205 to stop your loss at ₹205.
4. Difference between a limit order and stop order
As already learned about these two orders there is not much difference between them.
The only difference between the two is under stop order the transaction gets executed at a defined price whatsoever.
But in the case of the limit order, we look for the best price above and below the bid price or offer price which means not selling or buying as soon as the value reaches the limit price.
Also read: What is equity delivery?
5. What is the difference between LTP and CMP?
LTP full form is “Last traded price”.
LTP in the stock market means the price at which is last trade was executed between the buyer and seller on the exchange.
As we learned CMP is the price at which the share is currently trading in the market. CMP is the current price at which buyer and seller can buy or sell in the market.
So to summarize, the difference between LTP and CMP is that LTP is the past price and CMP is the current price.
To summarise the article CMP is the current price at which the stock is trading in the market. Also, it is the price at which an investor can buy or sell the share from the market.
The stock market is a very dynamic place, so the CMP of a particular script fluctuates every microsecond.
This is one of the many questions beginner investors usually ask, What is the minimum amount to start investing in the Indian stock market? read this article to get the required knowledge to start your investing journey.
1. What is meant by CMP in the stock market?
CMP full form is “Current Market Price”.CMP in the share market meaning, it is the price at which a share of a company is currently trading on the stock market.
2. What is CMP and LTP in the share market?
No, both are different. CMP is the current market price and LTP is the last traded price. First is the current price and later is the price of the last trade.
3. What is CMP in Zerodha?
The current market price (CMP) is the price at which the share is currently trading in the share market. It is available on the kite and Zerodha website in the market depth beside the exchange name.
I (financialwizardindia.com) am not a SEBI registered investment advisor.
This article is for information purposes only any scheme or company name mentioned here is just for example & not a recommendation.