How Is Damage Reduction Calculated and in what Order

All skills except for Thorns and Iron Maiden will only deal 1/6th of the normal damage in PVP combat. PVP combat also counts for damage from mercenaries and minions to another player, but not the other way round.

After the PVP penalty, the Druid's Cyclone Armor and the Necromancer's Bone Armor will reduce a fixed amount of damage. Where Cyclone Armor only applies to fire, cold, and lightning damage, Bone armor only applies to physical damage.

When active, Energy Shield absorbs a flat amount of damage at the cost of 2 mana per life. Each point in Telekinesis reduces this by 0.0625, with a minimum of 1 mana per life. When you don't have enough mana to cover all damage reduction, the remaining damage will be dealt, subject to the following damage reductions.

Next, all flat damage reduction from items is applied. For physical damage this is Damage Reduced by X, for magical damage this is Magic Damage Reduced by X. Contrary to magic resistance, magic damage reduction applies to magic and fire, cold, and lightning damage. There is also no cap on how much flat damage reduction you can stack on your character.

Resistances work just as you expect, they reduce the corresponding damage by the current resistance percentage you have.

Elemental and poison resistance all work in the same way and are capped at 75%. This cap can be increased to 95% with +X% to Maximum Y Resist on items or by the passive effect of the Paladin's resist auras

Magic resist works in the same way, but only applies to magic damage, contrary to magic damage reduction. There is also only one item that provides magic resistance, the crafted Safety Kite Shields. There is no way to increase the max cap.

Physical resistance acts the same way as other resistances, and is provided by Damage Reduced by X%. Sources of physical resistance are Enigma and Chains of Honor. A Ber rune also provides this bonus when socketed in armor, headgear, or shields. Physical resistance is capped at 50%, and there is no way to increase this cap.

After all resistances damage mitigation, the absorb bonuses are calculated. These bonuses will, just like resistances, reduce incoming damage by a percentage, but will also heal for the same amount. There is only fire, cold, and lightning absorb available, and each type is capped at 40%.

Like the % absorb, flat or integer absorb will reduce incoming damage by a flat amount, and will also heal for the same amount.

There is also magic flat absorb, and it will only absorb magic damage, contrary to magic damage reduction. Magic absorb can be found on Spirit, Crescent Moon, and Oath.

When your flat physical damage reduction exceeds the physical damage, the remaining reduction will overflow to magic damage reduction (keep in mind, counts for fire, cold, lightning, and magic damage). The same goes for magic damage, any excess reduction, will be applied to physical damage. This is useful, because often times, attacks consist of both a physical and an elemental or magical component.

Note that this overflow is applied after the percentage mitigations, unlike the normal flat damage reduction. This means that this overflow is extremely more potent than normal flat damage reduction.