Estimating Equity in No-Limit Hold'em

Before we start with the article, let’s first understand what Equity is all about and talk about how it relates to poker in general.

What is “Equity”?

The word itself actually means “fairness” – or the quality of being fair or impartial. This idea comes to us sometimes when things don’t seem so fair at the poker table. You get your stack with :Ace :Ah against an opponent’s :Kc :Kd and a K on the river – not fair!

Equity also refers to someone “sharing” something, such as shares of ownership in a company. With your aces you may have claimed your “fair share” of the pot, while your opponent with kings has much less of a “right” to the dead money in the middle of the table. But after the community cards come and his king comes, you lose your equity and he gets all the chips.

This situation refers to equity after all-ins. What happens during a hand, when there are still decisions to be made? How relevant is equity then?

The first time I really bothered to think seriously about what equity meant was sometime after I bought a house. For those of you who haven’t been through the process, most of us don’t buy a house outright, but rather perhaps make a down payment (a percentage of the total cost) and take out a mortgage to cover the rest. From then on, we pay it off each month, with most of that payment actually going toward the interest on the loan and the rest toward the principal.

Ultimately, your home equity refers to how much of the home you actually “own,” as determined by your original down payment plus what you’ve paid so far. Additionally, if the home has appreciated in value since you bought it, this also helps build your equity in the home. (Similarly, if your home depreciates in value, you lose equity.)

While buying a home can be quite complicated, the general idea of equity is quite simple. The equity you have in your home is essentially what you would earn if you were to sell it, and it is greatly affected by how much you have “put down” both at the time of purchase and with the mortgage payments you have made since. Before you sell your home, you can estimate this value by looking at the current market value of the home and subtracting the outstanding mortgage. If I think I can sell my home for $$200,000 and I currently have a $$120,000 balance, my equity in my home is $$80,000.

That said, I don't actually receive the equity until I actually sell the house. And the longer I wait, the more things can change between now and then.

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Equity = Current Value

The idea of equity works similarly in poker. It essentially represents a theoretical amount that you “own” from each pot you play. I say “theoretical” because in the end, not everyone gets their equity in each pot – in fact, usually only one person does.

You hold :Ad :Kc and your opponent has :7h :7s . You raise from late position, he calls from the small blind, building a pot of $300. With five cards to come, you have a little less than a 45% chance of improving enough to beat a pair of sevens. Your equity at this point is 45% of the $300, then, or $135.

The flop then comes :Ac :8h :2s , giving you top pair. Now, with two cards to come, you have a better than 91% chance of winning. Suddenly, your equity has gone up to 91% from $300, or $273. It's as if the market value of your hand just went way up. (Unlike buying a house, equity values change much faster in poker hands.) Or you could think of the Ace on the flop as a big fat payoff that lowers your mortgage. Either way, the future is bright.

If you can find a way now to increase the size of the pot, you will also increase your equity. If you bet $100 and your opponent calls, the pot grows to $500 and your equity increases again to $455. For every dollar that goes into the pot here, you increase your equity by 91 cents.

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Equity = (usually) an estimate

Of course, in a real poker hand, you wouldn't know that your opponent has a pair of sevens, so you can't know exactly how much equity your AK gives you. Instead, you estimate – top pair, top kicker is probably ahead of most of the hands your opponent has, so you think that you probably have more equity than him, given the likely range he has in his hands. This makes it preferable to try to develop the pot further and increase your equity.

It was a similar estimate that led you to raise preflop with :Ad :Kc in the first place. AK is a premium hand, which is better than most other hands preflop, and so your equity would increase, raising and increasing the size of the pot. Homeowners looking at the current market value of their home are also making an estimate of how much equity they have in the house, understanding – just as the person with :Ad :Kc does preflop – that this could change in the future.

Returning to Seidman's discussion, he looks at situations where he has missed the flop but could still have equity in the form of a draw that would improve his hand. Thus, when he has :Js :9s after a :Th :Tc :6h on the flop, he estimates that he has virtually no equity, despite having the same hand on a flop with :Ts :Th :6s giving him a flush draw and considerably more equity - a difference (which, together with his opponent's style) will affect his decision to call or raise after a continued round of betting.

Equity is not the same as cash in your pocket. You still have to close the deal, so to speak, which can be tricky – whether you’re selling a house or trying to win a hand of hold’em. But being able to accurately estimate your equity at any given point in a hand, by comparing your value to the value of other hands, will help you make better decisions going forward.

Article translated and adapted from the original: Subject to Change: Estimating in No-Limit Hold'em Hands