CMP is one of the most common terms used in the stock market. The full form of CMP is the ‘Current Market Price’.
If you are a beginner in the stock market field, then you might have heard this term for the first time in your life.
No worries, in this article, we will discuss what is CMP in the stock market? And CMP meaning in the stock market.
CMP in Stock Market
CMP in the stock market is similar to current market price or current market value in the stock market as they all are synonyms.
In simple words, the CMP meaning in the stock market is the average or a rough price of the stocks currently trading in the stock market. In addition to this, the approximate prices are the ones for which you can buy and sell the stock in the market.
Also, keep in mind that the prices in the stock market always keep changing and fluctuates. Hence, it is not possible to get accurately the same value as determined by the Current Market Price, CMP, in the stock market at some particular time.
You can join the stock market course to get complete basics to advanced knowledge of every term used in the stock market.
Now, as you have the basic knowledge of CMP meaning in the stock market and what is CMP in the stock market. You might be curious to know about finding the CMP.
Finding Current Market Value
The CMP meaning in the stock market is clear-cut and easy to understand, as the full form suggests. CMP for particular stocks is usually quoted or listed on financial websites, financial news networks, and brokerage websites.
It gives an idea of whether buying a stock is worth it or not.
So, suppose you are looking to buy or sell a stock. In that case, you should look for its Current Market Price on brokerage websites or financial websites, as there you will see a ticker symbol (a unique series of letters assigned for secure trading) for the company that interests you.
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Once you decide to trade a stock at the Current Market Price, you need to enter the ‘market order.’ A market order is an instruction from the investor to buy or sell a particular stock from your brokerage account.
Not to forget that the market price keeps on changing with the fluctuations in the stock market rates. Also, there is a slight time gap between the market order and the trade being executed. Hence, it is possible that during this slight gap, the market price changes, and it may go slightly above or below the one you placed the order at.
The change in the market value can also be created by the amount you transact; the higher the order, the price may shift up or down.
The changes in the market prices become constant during trading of less frequent securities and if the trading is being done during the volatile sessions.
This leads to higher buying rates and lower selling rates, or vice-versa. Finally, leading to a loss or anything that you didn’t expect.
A Limit order, as the name suggests, is limiting yourself from the market fluctuations. This limiting is often done by ones who are a little afraid or concerned about the price variations during trading.
In simple words, you need to specify a minimum price you want to sell or a maximum price you want to buy the stocks. Along with this, you need to inform your broker about these prices and confirm the limiting prices.
Let us understand this with an example.
If you have 100 stocks of a company, then you can tell your broker only to sell them when there is a minimum of $100 for each stock. Further, you may ask him to buy 100 stocks if the maximum price per stock is $100.
This limit usually takes a long time and sometimes a few days to fulfill the desired limits. Hence, the broker may have to be cautious and ready when the prices reach the desired goals. In this process, the commission may be higher than usual. Finally, after paying the commission, your profit gets reduced in this transaction.
There is another method to limit your orders. But it is slightly different and known as Stop Orders.
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Now, let’s have a look at the stop orders.
In stop orders, we decide a certain threshold or a limit for which we are good to sell or buy a stock.
We put a specific limit like asking a broker to sell if the price reaches $100 or buying a stock when the price hit $50 or less.
So, what’s the difference between a limit order and a stop order?
There is not much difference, but the key difference is in their trading. We look for the best price above or below the mentioned or specified price in a limited order. Also, not selling as soon as the value reaches the limit price.
Whereas in stop orders, if the stock price reaches the desired threshold, it is traded, and the broker doesn’t wait to get a better deal.
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The stock market has fluctuating prices that either rise or fall rapidly. Hence, it is essential to know What is CMP in the stock market and CMP meaning in the stock market to understand limit pricing and stop orders. This also helps in better investing.
Also, it is recommended to join The Thought Tree for learning the complete details of the stock market.
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I hope you liked the article; and it helped make you learn about CMP in the stock market and has cleared your doubt of CMP meaning in the stock market.
Happy Learning, Happy Investing!