In many fighting games, after you get a hit you can continue with a combo. Hitting your opponent puts them in a state where they can’t act, so it’s important to use this state to your full advantage. If you’re doing a combo you want to maximize the damage for the combo. At the end of the combo you want to maximize the advantage you get from it.
As your opponent has limited options its entirely up to how far you can take the hit. Free extra damage can be the difference between losing and barely winning.
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