🔍 Why Does It Happen?
Loss aversion: We fear losses more than we enjoy equivalent gains.
Mental accounting: We categorize investments emotionally as "winners" or "losers," leading to irrational decisions.
💡 A Realistic Scenario
You sell a strong-performing token (Token A) too early.
You cling to a poorly performing meme coin (Token C) hoping it recovers.
Even with data suggesting otherwise, emotions drive the decision.
🔄 How to Break the Cycle
Set rules before trading:
Use stop-loss and take-profit orders.
Keep a trading journal:
Record reasons for entry and conditions for exit.
Ask the key question:
“If I didn’t own this asset, would I buy it today?”
Focus on data, not emotion:
Evaluate based on future potential, not past performance.
🧭 Final Thoughts
The disposition effect shows how emotional investing can derail strategy.
Top traders succeed not by avoiding losses, but by managing risk rationally.
Recognizing this bias is a step toward more disciplined, clear-minded trading.
