How to Analyze XAU/USD with SMC: The Step-by-Step Process We Use Daily

Stop Guessing. Start Reading Gold Like an Institution.

Every day before Asia, London, and NY open, we sit down and run the same analysis process on XAU/USD. No indicators cluttering the chart. No “feeling.” Just structure, liquidity, and price action.

This is the exact process. Step by step.

Step 1: Determine the HTF Bias (H4 / Daily)

Before anything else: what is the market doing on the higher timeframe?

Open the Daily chart. Ask two questions:

Is price making Higher Highs and Higher Lows (bullish) or Lower Highs and Lower Lows (bearish)?
Has there been a recent CHoCH (Change of Character) that flipped the trend?

If the Daily is bullish, you only look for longs on lower timeframes. If bearish, only shorts. If unclear — you don’t trade.

This alone eliminates 50% of bad trades.

Step 2: Mark Key Liquidity Levels

Liquidity is where stop-losses cluster. The market hunts these levels before making real moves.

On the H4 chart, mark:

Equal Highs / Equal Lows — obvious double tops/bottoms where retail places stops
Previous Day High/Low (PDH/PDL) — institutional reference points
Weekly High/Low — higher timeframe liquidity pools
Asian session range — frequently swept in London

The rule: liquidity gets swept before the real move begins. If you see a cluster of stops above, expect price to grab them before reversing.

Step 3: Identify Order Blocks (OBs)

Order Blocks are the last candle before a strong displacement move. They represent zones where institutions placed orders.

How to find them on H1/H4:

Look for a strong move (3+ candles of displacement in one direction)
The last opposite candle before that move = the Order Block
Mark the body of that candle (not wicks) as your zone

Quality check: A valid OB should have:

Caused a Break of Structure (BOS) or CHoCH
Left a Fair Value Gap below/above it
Not been tested yet (first touch is strongest)

Step 4: Find Fair Value Gaps (FVGs)

FVGs are three-candle patterns where the middle candle is so impulsive that a “gap” is left between candle 1 and candle 3.

These gaps act as magnets — price tends to return to fill them partially (the 50% level, called Consequent Encroachment).

On Gold, FVGs on H4 are the most reliable. H1 FVGs work for intraday entries. M15 FVGs are for scalping only.

Step 5: Check Correlations

Gold doesn’t move in isolation. Before every session, we check:

Asset	Correlation	What it means
DXY	Inverse	Dollar up = Gold down (usually)
US10Y	Inverse	Yields up = Gold pressured
Silver	Direct	Silver confirms Gold moves
VIX	Variable	Volatility spikes can boost Gold
Oil	Indirect	Inflation proxy

If DXY is dropping + Silver is pumping + Gold is at a H4 Order Block = high confluence.

Step 6: Wait for the Killzone

The biggest mistake retail traders make: trading outside of session hours.

80% of Gold’s daily range happens during three windows:

Killzone	UTC	What happens
Asia	00:00–03:00	Range building, liquidity formation
London	07:00–10:00	First displacement, often sweeps Asia range
New York	12:00–15:00	Highest volume, continuation or reversal

We only take entries during London and NY Killzones. Asia is for observation.

Step 7: Entry Model

Everything above leads to this moment. The entry checklist:

HTF bias is clear (Step 1)
Price swept liquidity (Step 2)
Price is at a valid OB or FVG (Steps 3-4)
Correlations confirm direction (Step 5)
We’re inside a Killzone (Step 6)

Then:

Drop to M5/M1
Wait for a CHoCH on the lower timeframe (confirmation of reversal)
Enter at the FVG or OB that caused the CHoCH
SL below the liquidity sweep
TP at the next liquidity level (opposing PDH/PDL or equal highs/lows)

If any step is missing, we don’t enter. Discipline over action.

Real Example: London Session

Here’s how this looks in practice:

Daily: Bullish — Higher Highs since last week
Liquidity: Equal Lows formed at $4,710 during Asia
Order Block: Bullish OB at $4,700 on H4 (unmitigated)
FVG: H1 Fair Value Gap between $4,705–$4,715
Correlations: DXY dropping, Silver up 0.4%
Killzone: London open, 07:15 UTC
Entry: Price sweeps $4,710 lows, CHoCH on M5 at 07:22, entry at $4,712

Result: TP1 at PDH $4,745 (+33 pips, R:R 1:3)

What This Process Does NOT Include

RSI, MACD, or any lagging indicator
“Gut feeling” or “it looks like it wants to go up”
Trading during dead hours (14:00–23:00 UTC)
Entering without a clear invalidation level (SL)

Try It Yourself

We publish this exact analysis before every session — free on the blog. Each post includes:

HTF structure and bias
Liquidity levels marked
Active setups with exact Entry, SL, and TP
Correlation check
Market Maker reading

The pre-session reports (with exact setups delivered 30 min before open) are available with a subscription.

Or start with the free analysis: check the latest Gold analysis and follow along on your chart.