The benefit of using a Parabolic SAR is that it helps to determine the direction of price action. In a strong trending environment, the indicator produces good results. Also, when there is a move against the trend, the indicator gives an exit signal when a price reversal could occur. This tool works best in trending markets with long rallies or declines.
On the downside, the Parabolic SAR produces false signals when the price action starts moving sideways. Due to the lack of a trend, the indicator will move back and forth around the price bar, and this produces misleading signals. When a trader solely relies on the Parabolic SAR during sideways market conditions, it can result in losing trades.
To prevent such mishaps, traders should only trade in the direction of the dominant trend and avoid trades when a trend is absent. Also, using other indicators like moving averages alongside parabolic SAR can help prevent such losses.