The disposition effect is...

Selling winners early, holding losers long

In Odean's study, the losing stocks investors kept...

Did worse than the winners they sold

You own two shares. One is up 20%, the other is down 20%. You need cash. Which do you sell? Most people sell the winner.
That habit is the disposition effect: selling winners too early and holding losers too long. Selling a loser feels like admitting you were wrong.
In 1998, economist Terrance Odean studied 10,000 accounts at a US broker. Investors sold winners about 1.5 times as readily as losers.
And it cost them. The losers they kept went on to do worse than the winners they sold. They pulled up the flowers and kept the weeds.
Common mistake
Myth: "It's not a loss until I sell." Reality: the loss is already in your account. The price you paid is just a memory: the market doesn't know it.
Key takeaway
Ask: "If I had no position, would I open this trade today?" If the answer is no, the price you paid isn't a reason to keep it.

The disposition effect is... Selling winners early, holding losers longIt's the habit of locking in small gains quickly while hoping losing positions come back.
A helpful question for a losing trade is... Would I open this trade today?It judges the trade on what you know now, not on a past price that the market ignores.
Your entry price... Means nothing to the marketOther traders don't know or care what you paid. Price moves on supply and demand, not on your entry.
In Odean's study, the losing stocks investors kept... Did worse than the winners they soldHolding losers and selling winners felt better, but it also cost the investors returns.