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Effects change your character's health, capacity, speed and other abilities. Daily Luck, items, gear and buffs will generally give you positive effects. Such as double XP, 5% physical damage and others.
Monsters will try to weaken you with negative effects, such as poison, frostbite, and stun. Just the same as players are able to inflict Negative effects on monsters.
Some effects are known as Conditions, or Status, negative effects are also known as Curses or Debuffs, while positive effects are generally referred to as Buffs.