Explanation of Equity

Pot-equity - Equity, also known as “pot-equity” is one of the most important concepts in poker. It helps to describe which percentage of the pot we would be entitled to if we assume that all remaining players reach showdown. It’s possible to use an equity-calculator to calculate our equity precisely given known hands or known ranges. 

For example, imagine in Hold’em that we get all-in preflop with AKo and our opponent holds the TT. How likely is it that we win in this scenario?

According to one equity-calculator AKo has 43.123% equity. (TT has 56.877%). We could express this by saying that from the point of getting all-in, our AKo is entitled to roughly 43% of the pot in the long-run. If the total pot is 200bb (assuming both players have 100bb), then AKo should expect to walk away from the situation with roughly 86bb on average. Of course, in practice, it will either win the entire pot or win nothing (very occasionally chop). Either way, if we run the scenario enough times, we’ll see that AKo makes roughly 86bb on average. Hence the rough “expected value” from the point of getting all-in onwards is 86bb. 

Seeing as we always get to see a showdown when we are all-in, there is a direct correlation between our pot-equity and our expected value. The relationship between expected value and equity is not always so straight-forward however. Since expected value needs to factor in the possibility of various players folding throughout the hand it can’t be deduced purely by looking at pot-equity. Pot-equity simply doesn’t tell us how often players fold. Expected-value can therefore only be calculated after considering both pot-equity and fold-equity.

Fold-equityFold-equity expresses as a percentage, the likelihood of an opponent folding when facing a bet. If we were to say that we expect to have “40% fold-equity”, it means that we expect our opponent to be folding 40% of the time when facing a bet. Knowledge of our fold-equity can be used in conjunction with our pot-equity to make estimates regarding our expected value. One way of doing this is by using the expected value formula. For more information on this, see the glossary entry on expected value.

Other-Usage – The term equity finds its roots in investing and can be used to describe the percentage stake someone has in a certain company or investment. In a similar vein, some professional tournament players “sell equity” or “sell pieces of their action” in exchange for a percentage of their buy-in.

For example, if the tournament buyin was $10,000, a player might decide to sell 50% of the equity for $5,000. If he proceeded to cash in the tournament, he’d give 50% of the winnings to whoever it was that purchased equity. Of course, many pros who sell action employ some level of “markup” meaning that 10% of the buyin is not necessarily worth a 10% equity share in that player’s tournament. A tournament player who has a history of big cashes might elect to sell 8% equity share for 10% of the buyin etc.

Example of Equity used in a sentence -> We did not expect to be a favourite to win the hand but definitely had enough equity to justify a call based on our pot odds.

How to Use Equity as Part of Your Poker Strategy

Pot-equity - Pot-equity is most important in situations where the stacks are close to being all-in. This is because in all-in scenarios the expected value is directly correlated to the pot-equity. In scenarios where there are still a lot of chips left behind, pot-equity might give very little indication regarding a hand’s expected value. 

Having said that, generating a rough idea of our pot-equity is still useful for making implied-odds calculations in non-all-in situations. The most popular technique for estimating pot-equity is referred to as the two-times and four-times rule

For a discussion on how to count outs, check out the glossary entry under outs.

This method generates a working estimate of our pot-equity that can then be used in game for both pot-odds and implied-odds calculations. It does not however, give us a precise reflection of our pot-equity as we can see by analysing the table below. The accuracy of the two-times and four-times rule tends to decrease for very large number of outs. In the table we see our pot-equity as a percentage chance to hit, but also our probability of hitting expressed in the more traditional ratio format.


 

Flop to Turn

Turn to River

Flop to River

Outs

%

Odds

%

Odds

%

Odds

20

42.60%

1.35-1

43.50%

1.30-1

67.50%

0.48-1

19

40.40%

1.47-1

41.30%

1.42-1

65.00%

0.54-1

18

38.30%

1.61-1

39.10%

1.56-1

62.40%

0.60-1

17

36.20%

1.77-1

37.00%

1.71-1

59.80%

0.67-1

16

34.00%

1.94-1

34.80%

1.88-1

57.00%

0.75-1

15

31.90%

2.13-1

32.60%

2.07-1

54.10%

0.85-1

14

29.80%

2.36-1

30.40%

2.29-1

51.20%

0.95-1

13

27.70%

2.62-1

28.30%

2.54-1

48.10%

1.08-1

12

25.50%

2.92-1

26.10%

2.83-1

45.00%

1.22-1

11

23.40%

3.27-1

23.90%

3.18-1

41.70%

1.40-1

10

21.30%

3.70-1

21.70%

3.60-1

38.40%

1.60-1

9

19.10%

4.22-1

19.60%

4.11-1

35.00%

1.86-1

8

17.00%

4.88-1

17.40%

4.75-1

31.50%

2.17-1

7

14.90%

5.71-1

15.20%

5.57-1

27.80%

2.60-1

6

12.80%

6.83-1

13.00%

6.67-1

24.10%

3.15-1

5

10.60%

8.40-1

10.90%

8.20-1

20.30%

3.93-1

4

8.50%

10.75-1

8.70%

10.50-1

16.50%

5.06-1

3

6.40%

14.67-1

6.50%

14.33-1

12.50%

7.00-1

2

4.30%

22.50-1

4.30%

22.00-1

8.40%

10.90-1

1

2.10%

46.00-1

2.20%

45.00-1

4.30%

22.26-1

Whether we have enough equity to call against a bet will depend on whether we are getting the right pot-odds or implied-odds. For more information on how this works in practice see the glossary entries on pot-odds and implied-odds.

Fold-equity – It’s possible to generate an idea regarding how much fold-equity we need for bluffs of certain sizing to be profitable. For more information, see the glossary entries on bluffing and semi-bluffing.

See Also 

Expected Value, Bluffing, Semi-bluffing, Pot-odds, Implied-odds, Outs

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