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Effective chip count – in short, this is the maximum number of chips we can win or lose in a hand. For example, if we are playing heads-up and one player has $1 in the game, while the other has $10,000, the effective chip count will be $1, because neither player can win or lose more than $1 in this hand.
The effective chip count determines which hands we choose to play and what ranges we will play with. After all, we play differently when we have 10BB and 100BB, and with 500BB we will play differently again.