Combining Smart Money Concepts (SMC), Volume Spread Analysis (VSA), and Price Action
Market Overview
As of the London session on May 12, 2025, Gold (XAU/USD) is exhibiting clear signs of bearish structure development. A detailed examination of Smart Money Concepts (SMC), Volume Spread Analysis (VSA), and traditional price action patterns reveals a high-probability shorting opportunity within a well-defined supply zone.
1. Smart Money Concepts (SMC) Breakdown
- Break of Structure (BOS): A significant bearish BOS occurred around the 03:00 candle, confirming the shift from bullish to bearish order flow.
- Change of Character (CHoCH): Earlier CHoCHs signaled a shift in intent, and subsequent BOS events have reinforced bearish control.
- Supply Zones: A key supply zone has been established in the 3,280–3,292 range, where price previously reversed with strength.
- Demand Zones: Support has been observed around 3,260 and 3,250, acting as short-term demand and potential profit-taking areas.
2. Volume Spread Analysis (VSA) Insights
- Selling Climax: A sharp volume spike during the breakdown around 03:00 reflects potential professional selling activity.
- No Demand Bars: Later price movement showed low-volume up candles, which typically suggest weak buying interest and an opportunity for further downside.
- Effort vs. Result: High effort (volume) with strong downside movement, followed by low-effort (volume) rallies, signals distribution and further bearish intent.
3. Price Action Observations
- Bearish Rejection: The area around 3,280 showed strong rejection, forming a bearish engulfing pattern—confirming seller presence.
- Liquidity Sweep: Price briefly pushed above short-term highs (internal liquidity) before aggressively reversing—a classic trap to fuel institutional sell orders.
- Range-Bound Action: Current movement within a narrow range may suggest consolidation before continuation.
Trade Setup Idea (Short Position)
Bias: Bearish
Entry Zone: 3,280–3,285 (preferably after a minor liquidity sweep)
Stop Loss: Above 3,292 (to protect against a deeper supply test)
Take Profit Levels:
- TP1: 3,265 – recent swing low
- TP2: 3,250 – next key demand zone
- TP3: 3,235 – deeper support for extended targets
Risk Management Guidelines
- Never risk more than 1%–2% of your capital per trade.
- Wait for confirmation such as a bearish engulfing or rejection wick at the supply zone.
- Adjust trade size to fit your risk parameters.
- Monitor macroeconomic events that could cause volatility in gold.
⚠️Disclaimer
This analysis is for educational and informational purposes only and does not constitute financial advice. It is not intended to be used as a basis for any investment decision. Always conduct your own research or consult with a licensed financial advisor before engaging in any trading activity.
