What is CMP in the Stock Market?
CMP in the stock market stands for Current Market Price. CMP is the market price at which a stock is available to buy or sell at the present rate. When a trade happens at a particular price for a stock, the price at which the stock has sold impacts the new CMP of that stock based on the actual trading price, the volume traded, liquidity - the number of buyers and sellers for the stock and market sentiments.
Therefore, CMP in the share market for a stock is constantly changing based on trades occurring every second for each stock.
However, CMP in the share market should not be confused with LTP or Last Traded Price. LTP is the price at which the last trade has occurred for a stock. Although the LTP of a stock affects the CMP, when the volume traded is high, it is the actual price at which the last trade was carried out. Whereas the CMP of a stock is usually close to its LTP is the currently available price at which trade can occur. CMP is the current price at which a stock can be bought or sold.
When the next trade occurs between a buyer and seller at a mutually agreed-upon price (which need not be the CMP), that price becomes the new LTP, and the new CMP could be marginally different from the LTP, which is also based on market sentiments that are dynamically changing. After the last trade, the available price at which the buyers and sellers can now trade the stock changes – this becomes the new CMP of the stock.
How to Find Current Market Price (CMP)?
Now that we are clear about CMP meaning in the share market, we will see how to find the stock's current market price. Its current market price can be found on financial websites for a particular stock. If you already have a broker, then the broker's web trading platform will also tell you the current market price for all stocks. In Enrich mobile Hunt trading platform, the current market price of a stock is displayed at the top left corner when you click on the stock and view the details.
How to use CMP in trading?
CMP can be used for trading purposes in three ways:
1. Market Order
Market Order is to immediately place a buy or sell trade at the current market price. By the time the trade is executed, which could be a matter of seconds, the actual price at which the stock is bought or sold could differ slightly since the current market price keeps changing based on various factors, as explained above.
2. Limit Order
A limit order is a buy or sell order at a price based on the buy limit or sell limit respectively compared to the CMP and is triggered when the CMP is equal to the limit price or is lower or higher than the limit set. This type of order is usually placed when the investor wants to skim the profits by selling at a particular price limit as the stock price increases after buying a stock at a low price. The investor may want to milk the profits already made and not risk a bearish trend to start. So, the investor instructs the broker to execute the sell trade when the CMP reaches the set limit order.
Another scenario of the limit order is to buy at a particular price limit as the price falls. The goal is to increase your profit but not risk waiting for too long.
Once the limit price is reached, the limit order is not guaranteed to be bought or sold at the same limit price set because multiple trades are being executed every second.
The limit order is not executed if the current market price does not increase or decrease to the limit set. Please note, in case the limit order cannot be executed on a given trading day, it gets carried over to the next trading day.
3. Stop Order
A Stop Order is an order to buy or sell at the market price when it reaches a particular Stop Order Price. This type of order is usually a Stop Loss Order, where you protect yourself by stopping the loss to your unrealized gain already made so far or to stop further loss.
Usually, a sell stop order is made at a stop price below the CMP. Suppose the CMP starts falling, then the Stop Order is triggered when the CMP crosses the stop price, and the shares are sold at the CMP.
A buy-stop order is made at a stop price above the CMP. When the CMP is rising, the Stop Order to buy is triggered when the CMP crosses the stop price.
The key difference between Limit Order and a Stop order is that the Limit order specifies the exact price limit – the limit price or better. In contrast, the Stop Order is triggered once the stop price is reached or crossed, and hence the actual price at which the stop order is executed could be very different from the stop order price set.
Conclusion
The Current Market Price is the current price of stock available for trading. It helps investors understand how the stock is trading on the stock exchange. The CMP is determined by the LTP (Last Traded Price), trade volume, stock liquidity, and overall market sentiments. But the CMP is not the same as the LTP of a stock. Three types of trade orders are placed based on the CMP of a stock – Market Order, Limit Order, and Stop Order.
