<<Sometimes the reason a stock is down is because of the potential of a low probability negative event. If that event does not occur, you win. If you didn't even understand the issue to begin with you were lucky. Given that these negative possibilities are often low probability events, you might win 20 times in a row and think you are genius when in fact you are clueless. It just takes a long time for the probabilities to catch up to you.>>
I understand what you are saying and I agree with the majority of your post. For fun, let's take a look at the math though.
If you win 20 times in a row and make 25% as an average gain on such conditions in a tax free environment like a Roth IRA, then if you started with $1,000 you would end up with $86,736. So assuming the 21st time you made a whopping mistake that took 70% away from your pincipal, you're still left with $26,020.
If it took you 10 years to complete that 21 stock cycle then your average annual return would be 38.5%.
If it took 15 years to complete, your average annual return would be 24.2%.
If it took 20 years to complete, your average annual return would be 17.7%.
If you were lucky 10 times in a row and gained 25% each time that $1,000 would grow to $9,313. If you made that -70% in that 11th time your FV falls to $2,793.9 (it doesn't matter when that -70% stinker comes in really). Still, over a 10 year period that's an average annual return of 10.8%, right were the long-term stock market average lies.
-TF