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If you does physical damage, projectiles do phyical danage.
E.g. some fire damages can also be increased by physical damage nodes though: Converted Damage is counted as all the types it was for those increases*. So you might be converting 100% of physical damage to fire (the enemies don't receive physical damage from you in that case) and still benefit from the physical damage nodes.
It really boils down to: Was this damage (portion) of the specified type(s) at any time in it's calculation.
* not in the games sense of "increase", this also includes other types of keywords like "more"
Projectile damage increases damage(or multiplies if says more),any kind of damage if a skill is a projectile and it says it is a projectile.
So if you are ever in a question
"should i take 10% increase physical damage on my physical damage build or 10% increase projectile damage?"
The answer is,it is the same.
Counter-Example: Puncture doesn't state the word "projectile" at all, neither in text nor in tags*. It doesn't need to explicitly state that though, because it is tagged as "Arrow" and arrows are projectiles (not all projectiles are arrows though!).
* according to the wiki, assuming it's up to date
Example : %increased melee weapon damage : Means it works ONLY with melee weapons.
Now if you remove the melee statement to get : %incrased weapon damage, it will work ONLY with weapons (any weapon, melee, bow, wand etc.).
Now if you remove the weapon statement you'll get : %incrased melee damage : so now it means it ONLY works on melee damage (being weapon or not, like unarmed damage, or melee spell damage if that may be made in the future).
Now let's remove the melee and weapon statement, you'll get %increased damage : that means it works on any and all damage you might do.
Example 2 : %increased fire damage with weapons : means it only works on weapons (or weapon skills, being melee, bow, wand) doing fire damage (and only on the fire part of the damage).
Now let's remove the weapon part : %incrased fire damage, it now works only on any fire damage (attack, spell, totem, trap, mine, burning debuff etc. ) and only the fire part of the damage.
See, easy, only the limitations are stated.
From that point of view it is easy.
However, if I use Ice Shot, I assume I am using a projectile from it's arrow part and it's magic projectile part, right? So, it has both a physical and a magical part I assume.
I was going for an Ice ranger so I don't know if I should maximize damage by using the +10% physical damage or only go for projectile damage nodes.
Now As I said it works by limitation, not by addition. So in you case 10% increased damage = 10% increased projectile damage = 10% increased bow damage = 10% attack damage, because all of these criterias are not restricting your skill.
Now, if you read the skill it say something very specific : 40% of Physical Damage Converted to Cold Damage. The keyword here is "converted". And there is another one : Deals % of base attack damage. Here again wording is very precise, there are no mysteries here, everyword has a unique meaning transalted as a function into the damage formula.
From here that's pure maths. Let's take a simple example : you do 100 physical damage with your bow, your iceshot is lv 1. So base attack damage is 120%.
What happens first is that you damage gets buffed to 120 (120% of 100 = 120).
Then it goes the conversion. 40% of your physical damage is converted into cold damage. That means you will deal now, 60% as physical and 40% as cold (again it's a conversion, there is no damage gain, no damage loss, only the damage type will change).
So we get 72 physical damage + 48 cold damage = 120 skill damage.
Now there is something very important to remember here concerning mods. They work by restriction. That means that here, the %increased physical damage will apply to all physical damage, the one in the physical part AND so by transition, the one that will get converted. So by raising physical damage you will indirectly raise he cold part of the iceshot.
Any %incrased cold (or elemental, because cold is also elemental damage) damage you take will only work on the cold part.
So in 99% of the cases you always get better damage if you stick to physical damage instead of elemental damage for skill that have conversions, because the % will raise everything instead of 40% of the output.
Again that does not apply to projectile damage, because projectile damage is tied to the projectile, so the arrow you shot, before conversion (raising projectile damage will be the exact same as raising physical damage as well as raising any other base damage).
As a final point there is the INCREASED word, that word is important as does not just mean you do more damage. Increased in PoE means that the bonus comes off BASE (and that's important) damage, base damage being the flat damage (that you get from your weapon base damage + any flat damage mod, that multiplied by the base damage multiplier of the skill, like 120% for iceshot lv 1).
That's especially important for when you have multiple damage sources, like a bow doing 83-167 physical, 33-67 fire, 1-83 lightning (I chose the numbers on purpose for the next step).
In that case the ice shot lv 1 will raise each damage source by 20%,you'll then get 100-200 physical, 40-80 fire, 1-100 lightning.
Then %increased bonus from you passives and such will be applied, each one applying from the base, so if you pick two 10% increased projectile damage you will get 120-240 physical (10% of 100-200 = 10-20, you got two mods so it's +20-40), 48-96 fire and 1-120 lightning.
Then the next step is the 40% conversion of 120-240 which is 72-144 physical 48-96 cold.
Your arrow will then shoot for 72-144 phy, 48-96 cold, 48-96 fire and 1-120 lightning.
If you have other %increased elemental damage, they will further raise the 3 ele damages (but not touch the physical part).