When making a decision to enter a trade it's always advantageous to identify the current trend. I'm sure you've heard the saying "The trend is your friend". Your best opportunities are when you enter a trade after a pullback of the current trend but when trading with supply and demand you can identify trading opportunities that will go against the current trend.

The more conservative trader will wait for a confirmation of a trend reversal. A confirmation will consist of a series of higher highs and higher lows or lower highs and lower lows that defines a trend in the opposite direction of the current trend.

A bullish trend is a series of higher highs and higher lows. A bearish trend is when you have lower highs and lower lows. When the trend shifts from bullish to bearish or vice versa, we see that definition of the trend broken by price. But how it breaks may offer a clue as to how far the new movement may travel before a large reversal.

When looking at the reversal of a bullish trend, we know that the trend is officially over when lower lows are put in. But if price makes a lower high before making the first lower low, then it shows the lack of buying pressure in the markets and a larger likelihood that the resulting bearish trend will be stronger. 

If we are day trading then this is not as important but for swing traders and long term traders we want to have confirmation before we enter into a trade against the most recent trend.

As seen in the preceding picture, when price breaks to a new low first before making a lower high, the breakdown is likely to pause and retest before continuing. It could even have a much shorter movement downward before reversing again.

The same is true for bullish reversals of a downtrend. When there is a higher low put in first before a higher high, then the rally is more likely to continue as the sellers have given up and buying pressure has been building. But if the higher high is made before a higher low, you are likely to see a correction and retest of the breakout. You may also see a weak bullish trend resulting from this. If a double top or a double bottom is formed then we can get confirmation when there is a break out.