In trading, it is better to have several indicators confirm a certain signal than to rely solely on one specific indicator. Complement the SAR trading signals by using other indicators such as a stochastic, moving average, or the ADX.
For example, SAR sell signals are much more convincing when the price is trading below a long-term moving average. The price below a long-term moving average suggests that the sellers are in control of the direction and that the recent SAR sell signal could be the beginning of another wave lower.
Similarly, if the price is above the moving average, focus on taking the buy signals (dots move from above to below). The SAR indicator can still be used as a stop-loss, but since the longer-term trend is up, it is not wise to take short positions.
A counter-argument to the parabolic SAR is that using it can result in a lot of trades. The chart above shows multiple trades. Some traders would argue that using the moving average alone would have captured the entire up move all in one trade. Therefore, the parabolic SAR is typically used by active traders who want to catch a high-momentum move and then get out of the trade.
The parabolic SAR performs best in markets with a steady trend. In ranging markets, the parabolic SAR tends to whipsaw back and forth, generating false trading signals.