Felix Prehn, who runs Goat Academy, shares a simple idea: most people do not fail in markets because they are not smart enough. They fail because they react like humans. When prices drop fast, fear takes over. Many sell near the bottom and then miss the bounce back.
A key problem is drawdowns. A drawdown is the drop from a recent high to a lower price. For example, if an account goes from $100,000 to $70,000, that is a 30% drawdown. Even if the market later recovers, many people do not stay calm long enough to benefit.
To handle this, Felix Prehn focuses on a rules-based “risk-on, risk-off” approach. Risk-on means taking more risk by buying growth assets when conditions look calm. Risk-off means reducing risk by selling and moving to cash when conditions look dangerous.
The signal he watches is based on the VIX term structure. The VIX is often called a “fear index.” It reflects how much investors expect the market to swing up and down. “Term structure” means comparing VIX levels across different time periods, like short-term versus longer-term expectations. Felix explains it like a traffic light:
- Green light (calm VIX): big investors look more relaxed, so the system can be risk-on.
- Red light (spiking VIX): big investors look stressed and buy protection, so the system turns risk-off and steps aside.
This matters even more when using a tool like TQQQ. TQQQ is a 3x leveraged ETF tied to the Nasdaq. An ETF is a basket that trades like a stock. “3x leveraged” means it aims to move about three times the daily change of its index. If the Nasdaq drops 1% in a day, TQQQ can drop about 3%. That speed can help in strong uptrends, but it can also hurt badly in rough markets.
Felix Prehn’s main goal is not to win every day. It is to avoid the one big market crash that can wipe out years of gains. If large losses are avoided, compounding can do the heavy lifting over time. Compounding means gains can create more gains, because growth builds on a bigger base.
Learn more about Felix Prehn and Goat Academy here: About Felix Prehn & Goat Academy