Matthew George T778 Cooper

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What is disposition effect in forex trading?

The disposition effect is the tendency to sell winners too early and hold losers too long. Traders lock in small profits for psychological comfort but avoid realizing losses, hoping for recovery. Institutions overcome this by enforcing systematic exits. Retail traders suffer from skewed risk-reward ratios. Benefits: occasional relief from small wins. Risks: chronic underperformance. Solutions: pre-set stop-loss and take-profit levels, and journaling to track expectancy. The disposition effect highlights the conflict between human emotion and mathematical discipline—success requires embracing small losses and letting winners run.