CMP refers to the current market price of a particular stock. It is the most recent price at which the stock was traded on an exchange. You can use the to make decisions about buying, selling, or holding a particular stock.
How CMP is Calculated
The calculation of CMP is fairly simple. It is determined by the supply and demand of stock in the market. When there is high demand for a stock, the price goes up and when there is low demand, the price goes down. Various factors such as company news, economic indicators, global events, and market sentiment can influence the supply and demand of stock and hence, its CMP.
For instance, if a company reports better-than-expected earnings, it may lead to an increase in demand for the stock, driving up its CMP. On the other hand, if there is negative news about the company, such as a product recall or legal issues, it may lead to a decrease in demand for the stock, resulting in a lower CMP.
CMP can be used to assess the value of a stock in the market. If the CMP of a stock is significantly lower than its intrinsic value, it may be a good opportunity to buy the stock as it is undervalued. Conversely, if the CMP of a stock is significantly higher than its intrinsic value, it may be a good time to sell the stock as it is overvalued.
How to Find CMP
There are various ways to find the CMP of a stock. One of the easiest ways is to use online stock trackers such as screener or ticker. These websites provide real-time stock prices and other important information such as stock charts, news, and analysis.
Another way to find the CMP of a stock is through trading platforms such as Zerodha, Upstox, or ICICI Direct. These platforms provide access to live market data and allow you to place buy and sell orders directly.
Financial news websites such as Moneycontrol, Economic Times, and Bloomberg also provide real-time stock prices and market news, which can be used to find the CMP of a stock.
Also, check out our guide on how to invest in an IPO in Zerodha if IPO investment is what you are planning for.
Difference Between CMP and LTP
CMP and LTP are often used interchangeably but they have different meanings and uses. CMP stands for Current Market Price, which is the price at which a particular stock is currently trading in the market. On the other hand, LTP stands for Last Traded Price, which is the price at which the last trade for a particular stock was executed.
The main difference between CMP and LTP is that CMP is the price at which buyers and sellers are currently willing to buy and sell the stock, while LTP is the price at which the stock was last traded.
Another important difference between CMP and LTP is that CMP is constantly changing as buyers and sellers place orders in the market, whereas LTP remains the same until the next trade is executed.
For example, if the CMP of a stock is Rs. 100, but the last trade was executed at Rs. 95, the LTP would be Rs. 95, while the CMP would be Rs. 100.
If you are new in to trading, you can learn about margin in our latest article “What is used margin and how it works“.
How to Use CMP in Trading
CMP is a key metric used by traders to make informed decisions about buying and selling stocks. One way to use CMP is to combine it with other technical indicators such as volume, moving averages, and support and resistance levels.
Relative Strength Index RSI
For instance, you may use CMP in conjunction with the Relative Strength Index (RSI) to identify overbought or oversold stocks. If a stock has a high CMP and a high RSI, it may be overbought and due for correction. Conversely, if a stock has a low CMP and a low RSI, it may be oversold and due for a rebound.
Support and Resistance Levels
You can use CMP in conjunction with support and resistance levels to identify key price levels at which a stock may rebound or reverse.
For instance, if a stock has a CMP of Rs. 100 and has previously bounced off a support level of Rs. 95 multiple times, you may look to buy the stock at Rs. 95.
Another way to use the CMP is to place different types of orders.
A market order is an order to buy or sell a stock at the current market price. This type of order is executed immediately and is typically used when the trader wants to buy or sell stock quickly and is not concerned about the price.
A stop order is an order to buy or sell a stock once it reaches a certain price. This type of order is used to limit the trader’s losses or lock in profits.
For example, a trader who owns a stock that is currently trading at Rs 500 may set a stop order at Rs 450. If the stock falls to Rs 450, the stop order will be triggered, and the trader’s shares will be sold automatically.
A limit order is an order to buy or sell a stock at a specific price. This type of order is used to ensure that the trader gets the price they want.
For example, if a trader wants to buy a stock that is currently trading at Rs 500, but you want to buy at Rs 480, you can place a limit order to buy the stock at Rs 480. If the stock falls to Rs 480 at any time during trading hours, your order will be executed.
If you don’t know about “Support code”, read our guide on what is support code in Zerodha for a complete understanding and how to get it.
Q1. How often does CMP change?
CMP can change frequently, as it is based on the current market price of a stock. The price of a stock can change rapidly depending on a variety of factors, such as news events, economic indicators, and investor sentiment.
Q2. Can CMP be used for all types of stocks?
Yes, CMP can be used for all types of stocks, including common stocks, preferred stocks, and exchange-traded funds (ETFs).
Q3. How does CMP relate to market trends and volatility?
CMP is influenced by market trends and volatility, as it reflects the current market price of a stock. In general, stocks tend to rise in bull markets and fall in bear markets. During times of high volatility, the price of a stock can change rapidly, which can impact its CMP.
Q4. Can CMP be used to predict the future price of a stock?
No, CMP cannot be used to predict the future price of a stock. It only reflects the current market price of a stock.
Q5. How is CMP different from the closing price of a stock?
The closing price of a stock is the last traded price of the day, while CMP is the current market price at any given time during the trading day.
Q6. What is a bid-ask spread, and how does it relate to CMP?
The bid-ask spread is the difference between the highest price a buyer is willing to pay for a stock (the bid) and the lowest price a seller is willing to accept (the ask). The bid-ask spread can affect CMP, as it reflects the supply and demand for a particular stock.
Q7. Can CMP be different across different trading platforms or financial news websites?
Yes, the CMP of a stock can differ slightly across different platforms and websites as it is constantly changing in real-time based on various factors such as supply and demand, trading volume, and market sentiment.
Q8. Is CMP the same as the current market price (CMP) or spot price?
Yes, CMP, current market price, and spot price generally refer to the same thing in the context of the stock market. These terms represent the most recent traded price of a particular stock.
Q9. How can I determine if a stock is overvalued or undervalued based on its CMP?
To determine if a stock is overvalued or undervalued, you can compare its CMP with its intrinsic value or fair market value. If the CMP is higher than the intrinsic value, the stock may be overvalued, and if it is lower, it may be undervalued.
Q10. Can CMP be used to set a stop-loss order?
Yes, CMP can be used to set a stop-loss order, which is an order to sell a stock at a predetermined price level. For example, a stop-loss order could be set at 5% below the CMP to limit potential losses.
Q11. Can CMP be used to determine the liquidity of a stock?
Yes, CMP can be used as an indicator of the liquidity of a stock. If a stock has a high trading volume and a narrow bid-ask spread relative to its CMP, it is generally considered to be more liquid.