Simulation studies are presented regarding the performance of algorithms that localize point‐like radioactive sources detected by a position sensitive portable radiation instrument (COCAE). The source direction is estimated by using the List Mode Maximum Likelihood Expectation Maximization (LM‐ML‐EM) imaging algorithm. Furthermore, the source‐to‐detector distance is evaluated by three different algorithms based on the photo‐peak count information of each detecting layer, the quality of the reconstructed source image, and the triangulation method. These algorithms have been tested on a large number of simulated photons over a wide energy range (from 200 keV to 2 MeV) emitted by point‐like radioactive sources located at different orientations and source‐to‐detector distances.