This article will explain exactly what the Independent Chip Model (ICM) is. I would recommend reading this before my next article which will go into detail about how to use it correctly and will have some real “bubble” situation examples. A brief definition of ICM is that it allows you to put a monetary value on your chip stack at any given point in a tournament. This value is of course useful for calculating your equity in the tournament at that point and should be a good long term indicator. It is obviously not useful for one off examples as in tournament poker you cannot cash in your chips for their current value.
The second key factor is the prize structure of the tournament – how many places are being paid. Let’s firstly use the example where we have 1,000 chips out of 10,000 in play, there are 5 players remaining and only 1st place is paid. The monetary value of our 1,000 chips is going to be small, because our chances of leaving this tournament with any financial return are slim. However if we change the pay-out structure so that it pays 4 places equally then our chances of winning some money are considerably better and thus the monetary value of our stack is greater.
Using ICM to calculate your prize pool equity
If we take a situation where there are 10,000 chips in play and 3 players remaining, we have 5,000, player X has 2,500 and player Y has 2,500. How much are our 5,000 chips worth in the long run? As stated before, we cannot cash out our chips at any point for what we believe they are worth. We must see it until the end and see if we take down 1st, 2nd or 3rd place. However our chip lead obviously makes it more likely we finish 1st. We can use ICM to work out our prize pool equity, which is the amount of money we expect to win based on:
The current size of our chip stack.
The current size of other players chip stacks.
The amount of money in the prize pool and prize pool distribution.
A basic example would be at the very start of a $10 tournament, before a card is dealt everyone has the same chip stack and the same equity of $10 in the tournament. A similar example is as follows; there are 4 players remaining in a $10 tournament with a $100 prize pool and standard pay-out structure (1st - $50, 2nd - $30 and 3rd - $20). Each player has 2,500 chips and therefore has the exact same equity of $25.
Obviously in practice these calculations are not as simple as this, the chip stacks will not be round numbers and it is rare for players to have such equal stacks. For this example our pay-out structure is the same as above and we have 3 players; player A has 5,000 chips, player B has 3,000 and player C has 2,000.
Calculating ICM in this situation is complicated and time consuming, although it is obvious that player A’s stack is worth the most and player C’s is worth the least. Thankfully there are countless free ICM calculators available online. After inputting the prize pool, prize distribution and stack sizes it will tell you each player’s equity. The actual results for our example are as follows:
Player A – 5,000 chips = $38
Player B – 3,000 chips = $33
Player C – 2,000 chips = $29
Hopefully you now have a basic understanding of how ICM works alongside with prize pool equity. Obviously working out player’s equity in a tournament like this is interesting; however it is not very practical. It doesn’t take into account player’s skill ability or the luck involved in tournaments. In the next article we will discuss it on a much more practical level, by looking at “is the risk worth the potential reward” when faced with all-in decisions in tournaments.