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Gold (XAU/USD) has presented a compelling opportunity for traders following Smart Money Concepts (SMC), Price Action, and Volume Spread Analysis (VSA). This article outlines a high-probability trade setup on the 5-minute chart based on current market structure and volume behavior.
Market Structure Overview
Over the past trading sessions, Gold displayed a clear bullish structure, forming higher highs and higher lows with multiple Breaks of Structure (BOS). However, the market sentiment shifted as we observed a Change of Character (CHoCH) around the 3,430 region. This marked the beginning of a bearish phase.
The price then formed a lower high and aggressively broke below previous demand zones, confirming bearish intent. Currently, price action suggests a retracement move into a key supply area.
Smart Money Concepts (SMC) Analysis
- CHoCH and BOS Confirm Bearish Order Flow
Multiple CHoCHs and BOS after the price topped near the 3,430s confirm that the bullish trend has ended. - Supply Zone Established
The price has reacted strongly from the 3,400 – 3,410 zone, marking it as a potential institutional supply area. - Demand Zones Below
Two key demand zones are visible: one around 3,370 – 3,380, and a stronger one at 3,350 – 3,360 labeled as “Strong”.
Volume Spread Analysis (VSA) Insights
- Climactic Volume on Down Move
A sharp sell-off occurred with high volume, suggesting institutional distribution. - Weak Buying Volume on Pullback
The ongoing retracement to supply is marked by low volume candles, indicating No Demand and confirming a potential short setup.
Bearish Trade Setup
Bias: Bearish
Strategy: Sell the retracement into supply using SMC, PA, and VSA confluence.
Entry (Sell Limit Order)
- Entry Zone: 3,400 – 3,410
- Suggested Entry: 3,405
- Confirmation: Look for a bearish rejection such as a No Demand bar, bearish engulfing, or upthrust bar in this zone.
Stop Loss
- Placement: Above the supply zone, at 3,415
Take Profit Targets
- TP1: 3,380 (nearest structural low)
- TP2: 3,365 (reaction zone/demand imbalance)
- TP3: 3,350 (strong institutional demand)
Risk-to-Reward
- R:R Ratio: ~1:2.5 (up to 1:4 if TP3 is reached)
Alternative Bullish Scenario (If Invalidated)
Should the price break above 3,415 with a strong bullish candle and rising volume, the bearish setup becomes invalid. In that case:
- Buy on Retest of 3,405 – 3,410
- Stop Loss: Below 3,395
- Target: 3,430 – 3,440 (liquidity above equal highs & weekly high)
Conclusion
The current XAU/USD market conditions offer a technically sound shorting opportunity aligned with smart money principles. The confluence of SMC structure (CHoCH + Supply Zone), Price Action (retracement move), and VSA (low-volume buying) supports a bearish continuation. Traders should monitor the supply zone closely for confirmation and manage risk accordingly.
