This column was originally published on RealMoney on July 25 at 1:00 p.m. EDT. It's being republished as a bonus for readers.

One of the more difficult psychological hurdles for a trader to overcome is the sense of entitlement that accompanies profitable positions.

For example, you might buy 200 shares of a stock at $20 because you believe the fundamentals are compelling; the chart shows the stock just launching from a solid base, and you believe the stock could double over the next year. Six months later, your stock is at $40. That $4,000 investment is now $8,000. You've doubled your money in half that time. At this rate, your $8,000 could become $16,000 if the stock continues its upward climb. So you let your $8,000 run.

The outcome of this hypothetical isn't important. Maybe the stock moves to $100 or maybe it falls to $5. Either way, the lesson is the same.

You didn't really have $8,000 after six months. You had an initial investment of $4,000 and a paper profit of $4,000. Only if you close out the position are you entitled to keep that money. But as long as the position is still open, you are entitled to nothing except the increasing risk from a stock that has doubled in six months.

Somehow, though, it is our tendency to forget about our initial stake and instead simply blend the profit into the original stake and expect more of the same. So what should feel like the end of a very profitable trade instead starts to feel like the beginning of a new trade ... with a very large initial stake. That's a recipe for disaster if the trade goes awry. Here's why.

Now that you've got your "double," any pullback will likely trigger this response: "Once the stock moves higher again and I've got my double, then I'll sell." Sound familiar? Worse still, the price continues to fall, and you start feeling bad. Get it? You still have a very profitable trade on your hands, but you feel like a loser. You're kicking yourself for not closing that position.

And if you feel like a loser in this profitable position, then how do you feel about the rest of your portfolio? Chances are that all you're seeing are a bunch of lousy trades. You hold a "woulda, coulda, shoulda" pity party for yourself.

So how do we avoid this situation? First, establish a price target for each trade. Having a price target does not obligate you to close the trade out when your target is hit, but it certainly should prompt you to tighten up your stops to protect your gains. When you hit your target, you should realize that the price move is now mature. The more mature the price move, the greater the risk of the move ending.

Second, trim your position back if it gets too big. Yes, having outsized gains is a good thing. It's a great thing. But sustaining outsized losses is a bad thing that can be easily avoided by managing your position size.

Finally, when you have hit your target, give yourself some kind of reward. Perhaps it's dinner at your favorite restaurant; maybe it's a round of golf. By celebrating in some way -- no matter how small -- you are effectively marking the end of the trade and protecting yourself from taking the whole thing for granted.

Let's look at some reader picks: Halliburton ( HAL), Chipotle Mexican Grill ( CMG), Illumina ( ILMN), Parlux ( PARL) and AES ( AES).

Halliburton took a 20% haircut last week -- that rarely happens on large-caps like HAL. However, a selloff is a selloff, and this lower low really sets the stage for a reversal of the multiyear uptrend. But before that reversal occurs, a lot of things need to happen. So how do we exploit this huge dislocation in HAL? I'd say that the short-term direction is to the long side, but with a stop just beneath last week's low.

Think about it. If you are a buyer, you are assuming that the majority of selling was finished last week and that the buyers will become more aggressive now. The only way that thesis would be proven incorrect is if Halliburton falls even lower. So set a tight stop on this one. Longer term, we need to pay attention to the $37.50 level. If the stock peaks lower than $37.50, then that lower high would likely flush out a whole new bout of selling. You don't want to be there for that.

I've had a few questions about Chipotle Mexican Grill lately. This recent IPO was a superstar until early May. Since the peak around $67.50, the stock has been under a lot of pressure. But I've drawn a line at roughly $48 that coincides with the March breakout level as well as the April bottom. So far, demand at $48 remains strong.

If you are long and in pain, then shame on you for not taking profits when the stock hit a lower high in June. You might consider putting a stop below prior support, but keep in mind that a lot of stock has changed hands around $45 -- another 10% below Monday's close. Frankly, your tolerance for pain is the best determinant for stop placement. As for me, I'd be looking to buy once I'm convinced that the stock is done going down. There is a Chipotle near my place, and it's becoming increasingly crowded.

Illumina broke out last week when it reported stellar earnings and grabbed a few upgrades. So far, that gap to $34 has held up. In fact, the stock appears ready to move above the short-term resistance at $38. This sounds simple, but it's important to remember the basics. A gap can only hold up if the buying interest remains more aggressive than the selling interest. In other words, the bulls are not shying away from the sudden price increase.

It would be healthy for this stock to take a breather. However, sometimes the best trades just don't give you many chances to get in. Stop placement on a breakout buy above $38 is tricky. A stop just beneath $36 protects your capital, but you risk getting prematurely stopped out on a normal pullback. A stop beneath $34 gives llumina more room to gyrate, but it's more than 10% below current levels. When the stop is that wide, I believe the best method is to take a partial position on the breakout.

Parlux has really stunk up the joint lately. Back in June, the CEO wanted to buy the company at $29 a share (that's $14.50 adjusted for the recent 2:1 split). One of the reasons behind the bid was to get away from short-sellers. A month later, the bid was withdrawn, and the short-sellers decided to stick around.

The short interest on this stock is just obscenely high, and the current bounce could simply indicate some short-covering. Could it be that the majority of perfume wearers are deciding that they don't want to smell like Paris Hilton? While the short trade is really crowded, I suspect that the shorts are right on this one -- I would only buy this for a quick trade.

AES had been a pretty slow mover until May, when it started the 20% advance in price. But I wouldn't let the rally scare me away from this stock. Instead, I'd wait for a test of the breakout level. And if I was already long, I'd be keeping a snug stop to protect my profits.

Be careful out there.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Parlux to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
Dan Fitzpatrick is a freelance writer and trading consultant who trades for his own account in Encinitas, Calif. He is a former co-manager of a hedge fund and teaches seminars on technical analysis, options trading and asset-protection strategies for traders and business owners. Fitzpatrick graduated from the McGeorge School of Law and was a fellow at the Pacific Legal Foundation, a nonprofit public interest firm specializing in constitutional law. He also practiced law in the private sector before pursuing trading as a full-time career. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Fitzpatrick cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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