Taking Damage

Every hit you take goes through the same chain of reductions, in a fixed order. Knowing the order is what tells you why 75% fire resistance and a 75% Energy Shield together leave a quarter of a quarter, why absorb is worth double its number, and why nothing on your character can take more than half of a physical hit away by percentage.

The order

The Amazon Basin's defender list, as the game applies it:

1. The unit modifier — a player's hit on another player, a mercenary's on a player or a pet's on a player is cut to 17% first (difficultylevels.txt PlayerDamagePercentVSPlayer, MercenaryDamagePercentVSPlayer, PetDamagePercentVSPlayer). Monsters hit you at 100%. See Player versus Player.
2. Bone Armor or Cyclone Armor — the Necromancer's and Druid's shields take their share off the top.
3. Energy Shield — the Sorceress's shield takes its percentage of what is left and pays for it in mana. See Energy Shield for the price.
4. Damage Reduced by X / Magic Damage Reduced by X — the flat amounts come off next (Damage Reduced, Magic Damage Reduced).
5. Resistance — the percentage: fire, cold, lightning, poison or magic resist, and for physical damage your Physical Damage Reduction.
6. Absorb % — Fire Absorb and the other percentage absorbs take their share of what is left.
7. Absorb +X — then the flat absorbs.

What the two absorb steps took is given back as healing, up to your missing life, so a point of absorb is worth two of the damage it meets (the Basin's rule of thumb: percentage decrease = resist + (100 − resist) × absorb ÷ 50). There is a ceiling of 40% absorb, so absorb can never heal more than the hit did.

life lost = ((hit × unit modifier − armours − shield) − flat DR) × (1 − resist) × (1 − absorb%) − absorb+
healed    = min(what absorb took, missing life)

The caps at each step

Each difficulty takes a fixed amount off your elemental and poison resistances before the cap (difficultylevels.txt ResistPenalty): 0 in Normal, −40 in Nightmare, −100 in Hell. Physical and magic damage reduction are not penalised.

The penalty comes off before the cap: 75% in Hell takes +175% from gear, skills and quests together, and more if a Conviction aura or Lower Resist is on you.

Two hits, step by step

What this chain does not cover

Poison damage, Open Wounds and Crushing Blow have their own rules: poison ticks over time against poison resistance, Open Wounds bleeds a fixed amount a frame that no resistance touches, and Crushing Blow takes a fraction of your current life before the hit's own damage is even rolled (Open Wounds, Crushing Blow). None of them is absorbed by Energy Shield.