The SAR in Parabolic SAR means stop-and-reversal. The Parabolic SAR is an indicator that uses a trailing price stop-and-reversal technique to discover entry and exit points

Basically, the creator of the SAR - Welles Wilder, recommends using the Parabolic SAR in the direction o the price trend. First, establish the trend. Next, if the trend is upward, take a long position when the indicator touches below the price. Or sell when the indicator moves above the price.

Only use the Parabolic SAR if the market is trending. To determine if it is trending, use Wilder's ADX indicator. Wilder also recommends using .02 in the first parameter, and .2 in the second parameter of the indicator's values.

As you can see, Dell had a strong trend as represented by the ADX indicator below the chart. Next, we plotted the Parabolic SAR. Notice the SAR fell below the price, and the weekly average close after was way below the Parabolic SAR's level. This was a clear sell signal. Another sell signal is indicated by the bigger shaded circle. The SAR's level was above the price.

Another way to determine buy or sell signals is as stated in the above: If the price is above the SAR, you buy, if it is below the SAR, you sell. Look at the 2nd chart of Dell. Notice that how the price was above the SAR level. This indicated a buy signal.