As a new trader, it is a challenge to walk away once the goal is met, and I debated with myself what is the most effective way to learn the market, price behavior, and developing efficient and effective skills. I asked myself, should I be more liberal with my trades, even if this means over-trading? By doing this, I can learn price behavior, recognizing and taking entries through "reps" (the more I trade the more experienced I will be)? Athletes take this approach to fine tune their game. On the other hand, I asked myself, should I be more conservative with my trades, ending my day with a profit goal/loss, even if this means decreasing the exposure I have to the market? In the end I opted for the latter. I believe being more conservative mimics the behavior of trading in a live account, and reduces the likelihood that I will develop bad habits and inconsistencies.
I played video games competitively throughout my life, playing in tournaments and leagues for money. I find that there are many similarities that day trading has with competitive gaming and sports. One thing I try to really avoid during competitions and day-trading is stat checking because the more I check my stats, the worse off I am. Mentally, I feel that when I lend my attention to my stats, my performance decreases because I take away attention from the game at hand. Even behaviors such as celebrating and complimenting myself early can impact my performance (conditioning). In the end, I minimize my account window and focus purely on trading as much as I can.
As a researcher in psychology, I understand that there are many psychological theories that may explain this. Research has demonstrates the effects of mental load and fatigue, inattentional blindness on performance (Boksem et al., 2005; Hyman et al., 2010). As traders, we are required to process a significant amount information at once that will ultimately inform our decision. We constantly monitor price action, Level 2, historical evidence, indicators, emotions, etc. Processing this much information requires a significant mental load, which our brains can withstand so much of. After analyzing pre-market behavior and technicals, and taking our profits after analyzing opening action, we are mentally fatigued, despite our motivation to continue trading. Once fatigued by our initial trades, we stop perceiving things as clearly. Mix mental fatigue with high emotions (prolonged sympathetic activation), we might be easy to lose sight of details and misinterpret information, resulting in potential drops in performance.
While I believe that trades are independent of each other, I don't think our perception and biases are independent. I believe there are carryover effects that leak from one trade to another. We bring our biases from one successful trade, and might apply it to another trade, for better or worse. For example, in one trade, we might have take a trade on a VWAP hold that proves successful. In the next trade, we might see similar VWAP hold pattern, take the trade, and lose. Maybe we didn't perceive the lack of volume in the second trade? Whatever it may be, we may have been highly influenced by the first trade, which may have distorted our perception in the trades, ignoring details that might indicate otherwise.
In the end, while I believe that there is a correlation between # of trades and performance, I don't think there is a single factor that contributes to decreases in performance, but, rather, all factors collectively contribute to losses from overtrading. There are other things such as time-of-day, lack of volume, proportions of retail traders vs. institutional later in the day, etc, that may also have an effect.
Maybe an internal study could be conducted on this. I'd be happy to volunteer