Trade Edge Alpha/Strategy guides/JJ Simon Strategy
JJ Simon Strategy
The NQ fair value setup: continuation and reversion, explained in full.
A practical guide to the JJ Simons NQ Strategy, also written as the JJ Simon fair value theory strategy, for NQ and MNQ futures. One pre-open price becomes fair value, which creates a continuation setup away from the line and a reversion setup back toward it. Below is how the method works, the exact entry model, the volatility based stops, and what happened when I coded it up and backtested it over a full year.
Market
NQ / MNQ
Timeframe
1 minute
Session windows
9:30–11:00
2:00–3:00 NY
Typical target
1.5R
The method in one sentence
In short
Mark the pre-open price as fair value, trade the opening continuation away from it, then look for a reversion back toward it when the initial push exhausts.
Fair value theory
How the JJ Simons
strategy works
Fair Value Theory assumes that price may return toward a reference level when there is no new information that needs to be priced in. For NQ, the Nasdaq-100 futures contract, JJ Simon identifies two prices that repeatedly act as fair value: the 9:30 a.m. New York open price and the 2:00 p.m. afternoon price. The pre-open print is the reference this guide and the indicator use.
That gives two tradeable windows on the same logic. The morning session runs 9:30 to 11:00 a.m. New York time and is the one most people trade. The afternoon session runs 2:00 to 3:00 p.m. and works the same way off the 2:00 p.m. reference price. Both are traded exclusively on the 1 minute chart.
That single line does the work for the whole session. Everything after it is a question of which side of the line price is on, and whether the move away from it still has momentum behind it.
Core strategy parameters
- Market. NQ or MNQ on the 1 minute chart.
- Windows. 9:30 to 11:00 a.m., and 2:00 to 3:00 p.m. New York time.
- Continuation. Look away from fair value during the first 10 to 15 minutes.
- Reversion. After the push, look for a rotation back toward fair value.
Continuation and reversion
Two trades from
one fair value line
The method creates two trades from one line. Continuation follows the opening displacement away from fair value. Reversion waits for that move to exhaust and then targets the pre-open price. Record the two setups separately when you backtest, because they behave very differently and blending them hides which one is actually carrying the results.
Setup 01
Continuation
Trade in the direction of the opening push, away from the fair value line. This is the first 10 to 15 minutes after the open, where the session is repricing and displacement tends to be cleanest.
Setup 02
Reversion
Once the initial push runs out of momentum, trade back toward the fair value line and use the pre-open price as the target. This is the second half of the same idea rather than a separate strategy.
Entry model
Displacement,
BOS and MSB
Entries need two things at once: a displacement candle and either a break of structure or a market structure break. BOS signals trend continuation. MSB signals a potential reversal. Either can trigger an entry depending on which phase of the window you are in. If one of the two conditions is missing, the setup is lower quality and is meant to be skipped rather than forced.
What counts as a displacement candle
A displacement candle closes decisively, carries only a small counter wick, and is ideally larger than the candles around it. The point is that the move held into the close. A long counter wick means the push got faded inside the candle itself, which is the opposite of displacement and a reason to pass on the setup.
- Continuation. Wait for displacement and structure confirmation in line with the opening push.
- Reversion. Wait for momentum to fail, then look for MSB plus displacement back toward fair value.
- Target. JJ Simons commonly describes 1.5R with no active management.
- Opening volatility. Consider avoiding the first three minutes after 9:30.
Risk and trade management
Volatility based
stops and targets
Stop distance is set by the current average true range, so the same 1.5R idea scales across a quiet open and a violent one. Take profit is fixed at 1.5R with no trade management and no partial exits once you are in. These values come from the method itself and require independent testing before you rely on them.
ATR above 20 · High vol
50 pt stop75 point target · 1 contract
ATR 7 to 20 · Normal vol
25 pt stop37.5 point target · 2 contracts
ATR below 7 · Low vol
16.5 pt stop24.75 point target · 3 contracts
Position sizing
Contract count moves with the tier so that risk stays flat. One NQ point is worth $20, so trading 1, 2 or 3 NQ contracts at the matching ATR tier works out at roughly $1,000 of risk per trade in every case. That is the point of scaling the stop with volatility: the stop distance changes, the money at risk does not. Size down to MNQ if that number is too large for your account, since MNQ is one tenth of the contract.
The full checklist
- Mark the pre-open fair value price before 9:30.
- Wait for displacement plus BOS or MSB.
- Trade continuation early, or reversion later in the window.
- Use volatility for the stop and target around 1.5R.
- Session VWAP may add confluence. Track second attempts separately.
The test
So I coded it up and
backtested a full year
That is the whole method. The obvious next question is whether it actually holds up once you take the discretion out of it, so I rebuilt the rules as a TradingView indicator and a backtestable strategy and ran them over a year of data. Full breakdown below.
The rules, the code and the 365 day result
Does it hold up
What the backtest
actually showed
These are the headline numbers from that run, with both setups tagged separately so the continuation and the reversion could be judged on their own. They are hypothetical results from historical data and they are not a forecast.
1.94
Profit factor
56.7%
Profitable trades
2.38%
Max drawdown
365
Days tested
Read the full written guide
The complete JJ Simons NQ Strategy guide, including the fair value diagram and the setup examples from the indicator, is published as a free PDF on Scribd.
Common questions
JJ Simons NQ Strategy FAQ
What is the JJ Simons NQ Strategy?
It is a New York session strategy for NQ and MNQ, the Nasdaq-100 futures contracts, built on JJ Simon's fair value theory. The price immediately before the 9:30 a.m. cash open is marked as fair value. That single line then produces two trades: a continuation in the direction of the opening push away from the line, and a reversion back toward the line once that push exhausts.
What timeframe and session does it use?
The 1 minute chart, traded between 9:30 and 11:00 a.m. New York time. JJ Simons also discusses the 2:00 p.m. session as another possible window. Many traders avoid the first three minutes after the open because of opening volatility.
How do you enter a trade?
Entries need a displacement candle combined with either a break of structure or a market structure break. A displacement candle closes decisively, has a small counter wick, and is ideally larger than the candles around it. BOS supports a continuation entry, while MSB is the signal that the push may be turning and a reversion is setting up.
Where do the stop loss and take profit go?
Stops are scaled to volatility using average true range. With ATR above 20 the method uses a 50 point stop and a 75 point target. Between 7 and 20 it uses 25 points and 37.5 points. Below 7 it uses 16.5 points and 24.75 points. Each pairing works out at roughly 1.5R, which is the target JJ Simons commonly describes, with no active management once the trade is on.
What counts as a valid displacement candle?
It has to close decisively, keep the counter wick small, and ideally be larger than the candles either side of it. A long counter wick means price pushed and then got faded back inside the same candle, which is the opposite of what displacement is meant to show. On its own it is not an entry either: it has to land together with a break of structure or a market structure break.
Does the strategy also work in the afternoon session?
Yes. JJ Simon identifies two fair value prices on NQ: the 9:30 a.m. open and the 2:00 p.m. afternoon price. The morning window runs 9:30 to 11:00 a.m. New York time and the afternoon window runs 2:00 to 3:00 p.m. The logic is identical in both, continuation first and reversion afterwards, only the reference price changes.
How many contracts should you trade?
The method scales contract count against the ATR tier so risk stays constant. One NQ point is $20, so 1, 2 or 3 NQ contracts at the matching tier all work out at roughly $1,000 of risk per trade. That is a large risk number for most retail accounts, and MNQ is one tenth the size if you want the same structure at a smaller scale. Size to your own account rather than copying the contract counts.
Is the JJ Simons NQ Strategy profitable?
In my own 365 day backtest of the rebuilt version it returned a profit factor of 1.94 with 56.7% profitable trades and a 2.38% maximum drawdown. That is one test, on one instrument, over one year, using my interpretation of the rules. Backtested results are hypothetical and different assumptions on entries, fills, fees and slippage will change the outcome. Test it yourself before risking money on it.
Can I get the indicator?
Yes. The NAS100 Continuation and Reversion pack includes both the indicator and the backtestable strategy as full editable Pine Script source, so you can run the test on your own settings rather than taking my numbers on trust.
Run the test yourself
The indicator and the backtestable strategy, as full Pine Script source you can edit. Works on every TradingView plan including free.