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In this interview, prop veteran David Hale—author of Cash Rules: Reminiscence of a Day Trader—sits down on the Words of Wisdom podcast to unpack 23 years on real trading floors. He explains his “glitch trading” approach, forged in old-school prop environments, and why calm execution, discipline, and survival through quiet markets matter as much as big wins when volatility spikes.
You’ll learn what “glitch trading” really means (mechanical, low-speculation plays that exploit inefficiencies), when to size up, and how top traders adapt—shifting between equities, futures, and crypto—while keeping risk tight and emotions flat. If you’re a newer trader hunting a practical strategy you can execute without fortune-telling, this breakdown turns Hale’s hard-won lessons into a clear, beginner-friendly game plan you can start applying today.
David Hale Playbook & Strategy: How He Actually Trades
Core Edge: “Glitch Trading” Explained
Hale hunts for short-lived market inefficiencies—tiny mismatches in price, liquidity, or auction mechanics—that appear, pay, and disappear fast. The edge is repeatability, not prediction: catalogue the glitch, execute mechanically, and exit before it normalizes.
- Define a “glitch” as a repeatable micro-inefficiency (auction imbalance, halt-reopen mispricing, spread blowout, ETF/component lag, dark-pool print lag).
- Only trade a glitch with ≥3 logged occurrences, win rate ≥55% or average R ≥1.2 over the last 20 reps.
- Hold 5–30 seconds for pure microstructure plays; cap at 3–5 minutes if a catalyst is needed to resolve.
- Retire any glitch whose rolling 10-trade expectancy drops below +0.2R for two sessions.
Where He Trades (and Why)
He prioritizes liquid U.S. equities and majors in crypto, where fills are clean and routing matters. Options are a tool, not a habitat—he’ll use them only to define risk or express a catalyst efficiently.
- Focus list: top-volume equities, IPO/opening auction outliers, news leaders; add BTC/ETH (and one alt) during U.S. overlap.
- Avoid thin floats unless the borrow is confirmed and quoted spread ≤5 bps of price.
- For options: weeklys with ≥5,000 OI, penny increments; use when stock borrow/costs kill the equity edge.
A-Grade Setup Checklist
He grades every idea A/B/C. Size goes to A-grades only—when tape, context, and exit path line up.
- A-grade requires: (1) catalyst or auction event, (2) top-decile relative volume, (3) spread ≤2 ticks normalized, (4) pre-planned exit path.
- Mandatory confluence: opening imbalance ≥1% of float or reopen offset ≥0.75× 1-min ATR.
- No-trade if news is unresolved binary (e.g., pending decision) or SSR flips mid-sequence.
Entry & Fill Tactics
Speed helps, but control wins. He uses order types to capture an edge without overpaying when liquidity shifts.
- Enter with “post-then-hit”: rest at best bid/ask; if queue shrinks ≥40% or 3 seconds pass, convert to aggressive.
- Never cross more than 1 tick beyond the midpoint unless expected slippage <0.15R.
- If spread widens on fill, scale 50% at mid immediately; scratch remainder at −0.3R if book doesn’t mean-revert in 10 seconds.
- Max two add-ons, each only after fresh evidence (new imbalance or second volatility burst).
Risk & Sizing Framework
He treats risk like oxygen—measured and constant. One template governs everything, so he can move fast without thinking about the money.
- Risk per trade: 0.25% of equity on A-grade, 0.10% on B-grade; skip C-grade.
- Daily stop: −1.0% of equity or −4R (first hit ends the session).
- Size = (Equity × Risk%) ÷ (stop distance in $); round down to nearest board lot.
- Time-stop beats price-stop on microstructure: if thesis hasn’t resolved in 30 seconds, flatten to mid.
Daily Workflow (Prep → Trade → Review)
Repeatable process turns small edges into real money. He front-loads decisions in prep and standardizes review to keep only what works.
- Pre-market (T-60 to T-15): build a “glitch watchlist” of 5–8 tickers with imbalance thresholds, expected 1-min ATR, and borrow status.
- Live (open → +90m): trade only from the list; max 2 concurrent symbols; no new names after first drawdown.
- Post-market (20m): tag every trade with setup code, route, slippage (bps), resolution time; archive L2/T&S screenshots for A/B exemplars.
Play 1: Opening Auction Imbalance
At the open, order flow is often lopsided. He fades or follows the indicated cross only when the imbalance is extreme and liquidity can’t absorb it.
- Trigger: pre-open imbalance ≥500k shares or ≥0.8% of float; indicated open deviates ≥0.5× 5-day 1-min ATR from prior close.
- Entry: fade into final 30–10 seconds pre-cross if extension increases and the resting queue thins ≥25%; otherwise, go-with if first post-cross candle breaks the cross by ≥0.3× ATR on >60% aggressive prints.
- Risk: hard stop 0.6× 1-min ATR beyond the cross; backup time-stop 45 seconds after open if no revert/continuation.
- Exit: target VWAP touch or half-gap fill; trail remainder on 10-second swing.
Play 2: Volatility Halt Reopen
Halt reopens reset price discovery. He trades the first burst when one side clearly overwhelms.
- Trigger: LULD/volatility halt; reopen offset ≥0.75× 1-min ATR; reopen candle shows ≥3× relative volume.
- Entry: go-with if the second print reclaims or extends beyond the reopen price by ≥0.3× ATR and aggressor share >65%.
- Risk: initial stop 0.4× ATR; immediate scratch if momentum fails within 15 seconds or tape flips.
- Exit: scale 50% at pre-halt VWAP or prior swing; runner to 1.5× ATR or until aggressor ratio <55%.
- Cool-down: no second cycle if the first trade hits full loss.
Play 3: ETF–Component Divergence
When an index ETF lags its heavyweights, arbitrage desks close the gap. He rides that snap-back with tight controls.
- Trigger: top-3 components move ≥0.35 in % same direction inside 60 seconds while ETF lags by ≥15 bps.
- Entry: buy/sell the ETF at mid +1 tick once component momentum persists through two consecutive 15-second windows.
- Risk: stop if lag compresses to <5 bps or a top component reverses its 1-min trend.
- Exit: target parity with component basket move (lag = 0) or 0.6× 1-min ATR, whichever comes first.
Play 4: Cross-Venue Print Lag (Equities/Crypto)
Occasionally, a venue prints stale or slow. He hits the fast venue and exits as the slow tape catches up.
- Trigger: reliable signal that Venue A leads Venue B by ≥80 ms on price update and spread widens >1 tick on B.
- Entry: take the lead venue direction; aim to exit on the first catch-up print at B.
- Risk: if the lag disappears before fill + 2 ticks, flatten; hard stop at −0.25R.
- Exit: target = first opposing queue refill or 8–12 ticks in equities / 4–8 bps in crypto, then flat.
News Momentum but Rules-First
He trades news only when the structure—not the headline—creates a measurable edge. The idea is to let liquidity dislocations do the work.
- Trigger: first pullback after a confirmed news burst with relative volume ≥4× and spread normalized ≤2 ticks.
- Entry: buy/sell the pullback into the prior micro shelf; confirm with >60% aggressive flow on the resumption tick.
- Risk: invalidate on shelf break or if aggressive flow falls <50% for 10 seconds.
- Exit: partial at prior impulse high/low; runner to 1× 1-min ATR.
Trade Management & “Get Paid” Rules
The job is to monetize the first edge, not forecast the second. He forces payment early, so losers are cheap and winners compound.
- First scale at +0.5R on all A-grades; move stop to breakeven minus fees/slippage.
- Trail with 10-second swings on momentum plays; on mean-revert, hard-target the gap/VWAP and flat.
- If slippage on entry >0.2R, cut the target in half and tighten the time-stop by 50%.
- After any −2R sequence, trade one setup at half-size to re-sync with tape.
Performance Feedback Loop
Edges decay. He measures, prunes, and refreshes the playbook continually.
- Keep a glitch scorecard: expectancy, hold time, slippage (bps), aggressor %, and cancel/replace rate by venue.
- De-list any setup with two consecutive weeks of negative expectancy; re-test on the sim for 20 reps before reinstating.
- Add one new hypothesis per week (max); promote only after 30 live reps with ≥0.3R expectancy and stable drawdown profile.
Mindset & Session Hygiene
Discipline powers the math. He removes emotion by limiting decisions and enforcing breaks.
- Pre-commit to maximum trades (e.g., 8 per session) and max concurrency (2 symbols).
- Use a 3-minute reset after a full-R loss; no tape, no charts—just breathing and notes.
- If boredom trades appear (no watchlist name, no code), shut down platform features that enable them for the day.
Size Risk First: Fixed-R Positioning That Survives Any Tape
David Hale starts with risk, not setups, because the math of survival comes before the art of entries. He talks about choosing a fixed “R” per trade—say 0.25% of equity—so winners and losers scale with the account while emotions stay flat. With a constant R, he can judge performance by expectancy rather than dollar swings, which keeps him from pressing when markets are choppy. Hale’s point is simple: sizing discipline is the seatbelt that lets you drive faster when conditions warrant it.
He also explains how fixed-R sizing sharpens decision quality under pressure. When you know the loss ahead of time, you execute cleaner: entries are precise, stops are final, and partials actually mean something. David Hale ties this to daily risk caps, so one cold streak can’t nuke the week. That framework makes every strategy testable and comparable—because R is the same yardstick across setups, symbols, and sessions.
Trade Mechanics, Not Predictions: Let Microstructure Edge Do Work
David Hale stresses that the money comes from execution mechanics, not calling tops or bottoms. He focuses on repeatable conditions—auction imbalances, halt reopens, spread behavior—then runs a prewritten play instead of guessing narrative outcomes. By standardizing order types, queue logic, and time-stops, Hale removes hesitation and lets the tape confirm or cancel the idea quickly. The goal is to monetize the first edge, not the next headline.
He also keeps decisions binary to protect consistency. Either the book behaves as the playbook expects and he’s in, or it doesn’t and he’s flat—no “maybe” trades. David Hale’s approach turns each setup into a timed experiment with fixed risk and predefined exits. That way, the edge is measurable, improvable, and immune to mood or market noise.
Volatility-Based Allocation: Scale In Only When Range Expands
David Hale ties position size to the tape’s current range, so he isn’t swinging a hammer at a thumbtack. When ATR and relative volume expand, he allows add-ons; when the market compresses, he trades smaller or not at all. Hale treats volatility like fuel—if the tank is low, you don’t floor it; if it’s full, you can accelerate with defined risk. This keeps him from overtrading sleepy sessions and helps him press only when the math actually favors him.
He uses simple, testable gates: no scaling unless 1-minute ATR is in the day’s top decile and spreads are stable. Add only after fresh evidence—new imbalance, second burst through a key level, or sustained aggressor flow—never just “because price went my way.” David Hale caps adds at two increments and shortens the leash if slippage, jumps, or ATR rolls over. When volatility fades, he instantly reverts to base size and switches to take-profit targets instead of trails.
Diversify by Underlying, Strategy, and Duration for a Smoother Equity Curve
David Hale spreads risk across what moves differently: names, play types, and time horizons. He’ll pair microstructure fades with momentum continuations, balance equities with a crypto pair, and mix quick scalps with slightly longer event-driven holds. This way, one cold patch in a single symbol or style doesn’t dominate the P&L. The outcome isn’t higher thrills—it’s fewer equity whipsaws.
He also keeps each bucket small enough to matter but not big enough to hurt. David Hale tracks expectancy by category, so if ETF divergences cool off while halt reopens heat up, he shifts weight without changing his total risk. Duration is treated the same way: fast plays pay the bills while slower ones catch bigger swings, and neither is allowed to cannibalize the other. The point is a steadier line, not a perfect call.
Defined-Risk Entries, Fast Exits: Codified Rules Beat Gut Feel
David Hale builds every trade around a pre-declared R, so there’s never a debate once price proves him wrong. He knows the stop, the partial, and the time-out before he clicks, which makes the entry a yes/no decision instead of a negotiation with fear. By committing to fixed invalidation and immediate partials, he lets the tape pay him quickly and cuts losers before they get creative.
He’s just as strict on exits as he is on entries. David Hale moves to break-even after the first scale, trails on objective swing points when momentum is alive, and hard-targets VWAP or half-gap fills when it’s a mean-revert. If slippage spikes or spreads widen, he shortens the leash rather than hoping conditions improve. The result is simple: rules protect capital, speed monetizes edge, and gut feel doesn’t get a vote.
David Hale’s playbook boils down to a few non-negotiables: size risk first, trade mechanics over opinions, and let volatility determine how hard you press. Fixed-R keeps emotions flat and comparisons clean; time-stops and predeclared invalidation keep losers small; scaling only when range and liquidity cooperate turns hot tape into controlled aggression. He treats setups like experiments—opening imbalances, halt reopens, ETF-component lags—executed with specific order logic and short holding times, then measured in the same currency: R, slippage, hold time, and tape behavior.
He diversifies across underlyings, strategies, and durations so one cold patch can’t hijack the curve, and he prunes relentlessly: when a glitch’s expectancy decays, it’s benched, rebuilt, or retired. Prep narrows the day to a handful of qualified names; the session is just pressing A-grade plays within hard daily risk; review is where edges are scored and rules are tightened. The lesson set is simple and transferable: define risk, codify entries and exits, scale only when volatility pays you, and let a disciplined process—not predictions—compound the account.
