The last trade price, used synonymously with the market price, is the price of the most recent transaction for the product.
What is the difference between last, sell and buy prices?
The sell price is the highest price a buyer will pay to buy a product.
The buy price is the lowest price for which a seller is willing to sell a product.
The buy and sell prices are indicative of supply and demand at a given moment in time.
LTP is the price at which the most recent transaction was executed.
Is LTP the expected execution price?
The buy, sell, and last prices are all indicative. You can have no guarantee at what exact price your market order will be executed.
Where is LTP used?
LTP is commonly used in charts, portfolio valuations, and returns calculations as it provides a more accurate reflection of a product's value compared to the buy or sell prices. It is an industry standard across various asset classes, not limited to stocks.
This is true for every asset class, not only stocks. A good analogy is selling a house.
You may think your house is worth $1,000,000, so that’s what you’d like to sell it for - the BUY price.
The person wanting to purchase your house thinks it’s worth $500,000, so that’s the maximum they’re willing to pay - the SELL price.
In the end, the house sale might go through at $750,000. This would be the equivalent of LTP, and it would better reflect the house's value, not the buyer's or seller's perceived value.