TA Challenge: How to use the SAR to spot reversal signals?

Being able to analyse trending states of the market is an extremely useful ability. This article is going to take a look at one of the major indicators in the area.
Parabolic SAR
The parabolic stop and reverse, more commonly known as Parabolic SAR, PSAR or simply SAR, is a lagging trend- following indicator. It is displayed as a single parabolic line (or dots) underneath the price bars in an uptrend, and above the price bars in a downtrend.
The SAR has 4 primary functions. First, it highlights the current price trend, Second, it provides potential entry signals. Third, it provides potential exit signals. Lastly, it provides trailing stops.

In the chart above, the SAR appears below the price, signalling an uptrend. The SAR trails the price up until the price movement is finished and when the price touches the SAR, it changes, signalling the end of the current uptrend and a possible reversal to the downside. Buy on the first SAR dot of the uptrend and sell on the first SAR dot of the downtrend. The indicator can also be used to set trailing stops. This can be achieved by moving the stop loss to match the level of the SAR indicator.
SAR and other indicators
Combine SAR with other indicators to achieve a more accurate analysis and to determine the strength of a trend.
SAR and the ADX
You can combine the SAR with an indicator that determines the strength of a trend. One of the most common indicators used for this purpose is the Average Directional Index (ADX).