Equity is a very important concept that plays a very big role in shaping poker strategies and making complex calculated moves. It's also pretty easy to understand what it is:
Let's say that you and I are playing heads-up no-limit poker. Furthermore, it's televised (for some bizarre reason), so the audience at home know what we each have. If you have ever seen poker on TV, then you know how this works - they show your hand to the left next to your name. When all the hands are known, many shows then display how likely each hand is to win the pot at showdown, by some percentage. The commentator may say something like "He's 78% to win here, but he doesn't know it!" Those percentages show the average amount of times that the specific hands will hold up to win once all the cards are dealt. This is usually calculated with simulators, using a computer's power to check the outcome of very large numbers of possible sequences on the flop, turn and river.
And that's all there's to it - that given percentage constitutes your equity in the pot, at this point. Of course, the equity numbers for each hand will change a lot once the flop comes. Even a huge favorite like AA could suddenly find itself drawing dead (equity = 0%) after the flop when someone flops a straight flush. But flopped straight flushes are freak occurrences, and in the long run, whatever percentage the AA was to win pre-flop will prevail. There are great tools like our poker odds calculator that can show you your exact equity in any given situation (if you know the hands involved).
Now, once we understand what the concept of equity means, it's time to explore how we can use it to our advantage. Specifically, I want to introduce you to the concept of betting for value before all the cards are out. This is commonly done even by absolute beginners, but it's not always known exactly why, and it's not always done at the right times. The situation itself is simple, let's say that you have:
on a board of
There are two other people with you to the flop, who both called your pre-flop raise. They check to you. You figure to have the best hand, so you bet. You get one caller and the other guy folds. Not a particularly uncommon scenario, but let's look closer at your reason for betting on the flop: You figured to have the best hand. That's a good reason, for sure, but it's hardly a very specific reason. What does it mean to have the best hand? Unless they both fold, there's a chance that you've just now put in money with what will turn out to be a losing hand by the river - one of them may be calling with 7-2o, and will catching another deuce on the turn. Your bet on the flop will have cost you money, not won you money. Do you recognize this reasoning? It's pretty common, and I think most players when they just start out struggle with this idea - that raising with a hand that may be outdrawn is actually correct. After awhile, they will have been subdued by the books and articles who all tell them to raise in a situation like this, and in time they will do it by habit. Let me explain what makes it correct, though, and further down we will look at some examples, some of which may surprise you.
We've already suggested that your opponent holds 7-2o in this flop, so there is a chance that he will outdraw you. In fact, he has five outs to win: Three sevens and two deuces. The odds of that happening on the turn are 40-5 against (40 of the remaining cards on the turn will not help him, and 5 will) - this translates to roughly an 11% chance of being outdrawn on the turn. Then he'll have a chance to outdraw us again on the river, so his actual chance of winning is higher still, around 19%. Conversely, this means we have an 81% chance of winning. Now we have the percentages calculated, and we know that these numbers represent our equity in the pot. What does it mean when it comes to our betting or raising?
It means that for every dollar we manage to get into the middle of this pot at this point, we will win 81 cents.
Since Mr. 7-2o will call our bets, we only supply half of the dollars that go in - and we get to keep 81% of our money, as well as 81% of his! All in all, for every bet we make, we stand to win 1.6 bets back. And that's why betting and raising is correct - we will win more than our share of the bets.