Explanation of ICM
ICM is an abbreviation for “independent chip model” . This is a technique we apply to give a monetary value to the chips we hold in a poker tournament. You may wonder why this is necessary when we can just tally the chips to make our decisions?
The challenge arises because changes in our chip count do not directly correlate to their monetary equivalent. For instance, if we double our chip stack, we are not guaranteed to see a comparable increase in its cash value. In fact, there are occasions when doubling the chips might only lead to a minimal uptick in monetary worth. This significantly influences our understanding of Expected Value (EV) calculations and how we should assess the profitability of various moves.
The disparity between the number of chips and their financial worth is closely tied to the specific payout structure of the tournament we participate in. For example, a given number of chips might hold more or less significance depending on whether it’s a winner-takes-all event or a satellite tournament.
Given that manually calculating ICM can be quite intricate, most players rely on software to handle these calculations. There are several free ICM calculators available on the internet. By simply entering the chip counts of all active players and the tournament's payout structure, we can quickly find out the real-world monetary value represented by each player’s stack.
Example of ICM used in a sentence -> Taking into account ICM factors, we found it necessary to fold our pocket Queens before the flop.
How to Integrate ICM into Your Poker Strategy
Let’s illustrate what kind of information you can obtain from an ICM calculator with a brief example. Picture the following scenario of a tournament.
In this example, there are a total of 10,000 chips on the table, and 5 players are still competing in the tournament.
Player 1) 4,000 chips
Player 2) 2,500 chips
Player 3) 2,000 chips
Player 4) 1,000 chips
Player 5) 500 chips
This is a satellite format where the top 4 players earn a tournament ticket worth $25. Here’s what the ICM calculator reveals -
Player 1 - $24.50
Player 2 - $23.60
Player 3 - $22.80
Player 4 - $18.50
Player 5 - $10.51
It's noteworthy that even though player 1 possesses eight times the number of chips as player 5, the actual value of his chip stack is only about 2.5 times greater.
Disregarding any blinds for a moment, let’s say player 2 decides to go all-in preflop, and player 3 is contemplating whether to call. If he has the pot odds necessary for a call (in this scenario, he needs 50% equity or less), it could be considered a +EV decision in terms of tournament chips (often termed chip-EV). However, this call would likely not be favorable when considering $EV , where we factor in the real-money value of each player's stack instead of just the chip count. Here’s the reasoning behind that.
If player 3 ends up winning the all-in, the financial value of his stack increases to $25 (which means he secures a ticket). This translates to a profit of $2.20 relative to his current stack. In the unfortunate event that he loses, his stack becomes worthless, representing a loss of $22.80. Therefore, he would be risking $22.80 to gain $2.20, which implies he needs a very high percentage of equity—much more than he would typically have. While it may seem like an even bet in terms of chips, when we think in terms of dollars, the risk-reward ratio appears severely imbalanced.
This illustrates that even opting to fold pocket Aces preflop can be justifiable in certain tournament situations. To put it simply, for player 3, it might be wiser to maintain his stack in the hopes that one of the other players gets eliminated or blinded out. This way, he can ultimately secure the $25 without endangering his own chips.
Now, using the same chip data, let’s assume this scenario is not a satellite tournament anymore, but rather a standard tournament where prizes are awarded to the top 3 finishers.
1st Place: $50
2nd Place: $30
3rd Place: $20
By re-entering the data into the ICM calculator, we receive the following outcomes -
Player 1) $32.82
Player 2) $25.68
Player 3) $22.29
Player 4) $12.60
Player 5) $6.60
Observe that the ICM value of player 5’s stack is now significantly different from that of player 1’s stack. What insights can we draw from this?
As tournament structures shift closer to a 'winner takes all' model, the relationship between $EV and chip-EV becomes more aligned . In a pure 'winner takes all' tournament, we can think of it as a cash game where the chip-EV and $EV are the same. Conversely, satellite tournaments often present substantial differences between these two values. Even very short stacks can have notable value when close to the bubble in satellite formats, as they can secure the full payout if someone else gets eliminated before them.
See Also
Tournament , Bubble , Structure , Sit and Go , Cash Game