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I'm a little baffled that I couldn't find a single mention of this very odd 'feature' when I searched for it.

Armour, referring to the collective total of your Armour stat, not to individual pieces of equipment you wear.

Each point of Armour reduces incoming melee damage by a % (presumably only by the selected enemy?), lowers dodge % (this penalty may be mitigated by Strength) and lowers spell hit & spell critical hit chance.

This is a REALLY weird system. Even the equipment that's obviously intended for mages (boosts Intelligence, for example) gives significant penalties to my spell hit & spell critical hit chances.

Am I supposed to put points in Strength, even though level ups are very infrequent and I'm very strapped for points? Will Strength even mitigate the magic penalties from Armour?

Am I supposed to just not wear armour at all? I found this cool robe which gives +1 Intelligence, but it renders itself almost completely worthless as it drops my already low spell critical hit chance from 3.5% to 2.5%!

(I wonder if this is why I miss so often with my spells, or if spells are just seriously inaccurate, at least at lower levels...)
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bushwhacker2k: I'm a little baffled that I couldn't find a single mention of this very odd 'feature' when I searched for it.

Armour, referring to the collective total of your Armour stat, not to individual pieces of equipment you wear.

Each point of Armour reduces incoming melee damage by a % (presumably only by the selected enemy?), lowers dodge % (this penalty may be mitigated by Strength) and lowers spell hit & spell critical hit chance.

This is a REALLY weird system. Even the equipment that's obviously intended for mages (boosts Intelligence, for example) gives significant penalties to my spell hit & spell critical hit chances.

Am I supposed to put points in Strength, even though level ups are very infrequent and I'm very strapped for points? Will Strength even mitigate the magic penalties from Armour?

Am I supposed to just not wear armour at all? I found this cool robe which gives +1 Intelligence, but it renders itself almost completely worthless as it drops my already low spell critical hit chance from 3.5% to 2.5%!

(I wonder if this is why I miss so often with my spells, or if spells are just seriously inaccurate, at least at lower levels...)
I think that it is a little late but don't bother with critical hit chance in any way it will be around 20% which is not much. Best armor you can get is via crafting and there for mage you will need ancient linen for armour + some stats (silver bark, ectoplasma, dragonfly); fire and shadow damage (fire root, skull); hit chance and critical hit chance (moth eye) and some res (frog poison sack). With equipment above your mage will hit with nightfall for about 80 p/t and with fireball2 for about 340 which is enough to annihilate everything before it reaches your mage.
But such mage has a constant hunger for mana pots so imho archer will be preferable for range combat.
Been a while since I've played, but yes, Armor Crafting is vital to Mages. I created armor for myself at Armor Crafting 2 and then later at Armor Crafting 4.

As I basically speculated in my original post, the Armour stat is actually a negative for Mages, you want it as low as possible while still getting Magic Accuracy and Magic Critical bonuses. When crafting, use as little of the base material as possible (for Mage armor, of course, other classes will probably want more armor).

With armor made from Armor Crafting 4, using Ancient Linen, I recall my Magic Critical rate reaching over 25%, which is extremely high as far as critical hit rates go in games.

Armour that you find is very likely to actively make you worse at what you do as a Mage. Unequipping your gear upon starting a new game is a genuinely good decision.

Absolutely standing by my conclusions: this is a WEIRD system.

(mostly just posting what I recall for posterity or w/e)
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mrak999: But such mage has a constant hunger for mana pots so imho archer will be preferable for range combat.
Archer suffers same issue with armor. I had to sacrifice vitality and craft armor with dex/str only to buff accuracy and critical hit. Even when my archer has 102% to hit in melee attack he still has only 97% for bow attack, with 20% crit. I agree, this armor system is weird. Both archers and mages have to run naked in custom armor if you want them to attack efficiently.
Someone told on forums that best armor possible (STR based for melee warrior) absorbs only ~20% of damage so it is still almost nothing, you can run naked for similar effect. Elemental resistances also offer very little protection assuming that you can't have high resistances.
Best thing would be to completely disregard armor rating and pick gear based on VIT/DEX/STR.