# Disposition Effect

*Behavioral Finance — Finicade finance glossary*

The disposition effect is the documented tendency to sell winners too early and hold losers too long, because realising a loss makes it feel final. It is costly twice over: momentum means winners tend to keep winning, and in a taxable account it's exactly backwards, since harvesting losses and deferring gains is what the tax code rewards.

**Also known as:** selling winners too early, riding losers

**Related terms:** [Loss Aversion](https://finicade.com/glossary/loss-aversion), [Prospect Theory](https://finicade.com/glossary/prospect-theory), [Tax-Loss Harvesting](https://finicade.com/glossary/tax-loss-harvesting), [Behavioral Gap](https://finicade.com/glossary/behavioral-gap), [Sunk Cost Fallacy](https://finicade.com/glossary/sunk-cost-fallacy)

Source: https://finicade.com/glossary/disposition-effect