This from ICMIZER:
What is ICM?
ICM stands for the Independent Chip Model. It is a model that allows you to convert a tournament players chips into their
real money equity as a percentage of the total prize pool. It essentially allows you to get a real money value for your tournament chip stack or to work out the financial risk/reward of a particular decision in tournaments. If you play tournaments it is essential you have a knowledge of ICM poker, otherwise you will make big financial mistakes.
Before it was known as ICM, the Independent Chip Model began life as the Malmuth-Harville Formula in 1987. It was based on a similar formula for making horse racing predictions and was initially used in poker to get an estimate of the value of a stack at a final table for deal making purposes. It was much later after the
online poker boom that ICM was used to guide strategic decisions. In particular the decisions on or around the money bubble, and afterwards.
The early adopters of ICM were mostly Sit & Go (SNG) grinders because single table tournaments were much easier to ‘solve’ in ICM spots because they had a small amount of players. SNG grinders were also exposed to more situations where ICM had a major influence in any given session every time they played. ICM fell out of fashion for a while when multi table tournaments became the dominant format in online poker, but in recent years MTT grinders have woken up to the importance of ICM in large field tournaments.
ICM being adopted by SNG grinders led to the creation of ICM solver technology like ICMIZER which has developed and kept up with the changing landscape of online poker. ICM applies to all poker formats where there are two or more payouts, whether they are MTTs, PKOs, satellites, SNGs, Double or Nothings, Spin & Go Max, or anything else that is developed in the future of poker.
Why ICM Poker is important
In a cash game the value of a poker chip is constant. A $1 chip represents $1 at the tables at all times. In a tournament that is not the case, the value of your chips fluctuate throughout the game. As such your decisions in a tournament are different to a cash game, even if the position, cards and number of blinds are identical. If you play a tournament hand exactly like you would a cash game hand you will lose a lot of money over time.
A good way to grasp why ICM is one of the most important considerations in poker tournaments is with a simple example. Let’s say you are playing in a $100 SNG with ten players and there is no rake. Each player begins with 100 chips. What is the value of a single chip at the start of the tournament?
The answer is $1. There are 100 chips, one for every dollar of the buy-in.
Let’s say that this tournament has three payouts - $500 for 1st, $300 for 2nd and $200 for third. Each player at the table has eliminated another player at the table, meaning five players remain and they all have 200 chips each. What is the value of a single chip now?
It is still $1. Each player has 200 chips and essentially has $200 of equity now, so each chip is worth $1.
Now let’s fast forward to the end of the tournament and one player, let’s call her Jane, has won all the chips, so she has 1,000 chips. What is the value of a single chip in her stack now?
The answer is actually $0.50.
What has happened?
The chips have literally halved in value. This is because of what separates tournaments from cash games - the payouts. Jane has won $1,000 worth of chips but because of the payouts she can only win the first prize of $500. If this had been a $100 buy-in cash game where she won all the chips at the table she would have $1,000 right now, but it is a tournament so her winnings are capped.
Where has the other $500 in equity gone? It has gone to the runner-up and third place finisher in the form of payouts.
This difference between tournaments and cash games has major strategic implications. If you make a $100 bet in a cash game and get called, you win $200 when you have the best hand. This 1:1 ratio is what is called a Chip EV (cEV) situation. If you bet your 100 chips in our example tournament you risk $100 of equity, but you do not get $100 in real money equity back when you win. It varies, but you always stand to win less than you risk in any tournament decision (except in PKO tournaments). The broad strategic adjustment is to, therefore, play tighter in tournaments than you would in cash games.
Consider the following example, which you can replicate yourself using
the free ICM calculator at ICMIZER.com. It’s the start of that rakeless $100 tournament with 10 players and $500/$300/$200 payouts. Let’s say that two players go all-in against each other, blind vs blind, and one player is eliminated, meaning that nine players remain, one has 200 chips and the other eight still have their 100 chip starting stack.
What would you say the equity was of the new chip leader?
If you said $200, you would be wrong. If this was a cash game that would be correct, but the actual answer is $184.44.
Where did the other $15.56 go?
It went to the other eight players.
