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In this case, that will leave the player with exactly the same effective resistance: 75%. If a character has 200 fire resistance, only 75% will be effective (or up to 95% depending on items), and if a monster has a Conviction Aura that reduces his fire resistance by 75, he will still have 125 fire resistance left.
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The natural cap for elemental resistances can be increased by equipping items that provide +Max Resists. There is only one item in the game that provides percentage-based magic resistance: the crafted Safety Shield, which adds 5-10% Magic Resistance. Items such as the Stormshield, a unique shield with 35% Physical resistance, are often viewed as standard end equipment by many builds. Physical resistance is harder to come by and is most often seen used by high-level characters. Of the various resistances, the four elements are often the primary focus. For PvP, resistances are often of utmost importance as well. Many of the deadlier attacks in Normal and Nightmare, such as Mephisto's skull lightning is rendered quite harmless with high resistances, while in Hell difficulty, high resistances are often necessary for a character not to die immediately when encountering the more deadly enemies. Resistances are very important for any character.
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Resistances work by reducing the received damage by a percentage value, so if an attack deals 100 fire damage, and someone has 50% fire resistance, only 50 fire damage is inflicted.