I found this article very good to teach everything what is needed to know about the damage step and its parts.

These rulings are from Curtis Schultz, the man who Konami gives rulings to so he can pass them on to TCG players.

From Curtis:

The Damage Step

The Damage Step is comprised of a series of events. The start of the Damage Step, flipping the face-down attacked monster face-up, damage calculation, inflicting Battle Damage, activating the Flip Effect of the flipped monster, and sending a monster destroyed by battle to the Graveyard are seperate events that all happen during the Damage Step.



The Damage Step has specific rules that govern what can or cannot be activated. Some cards can't be activated at all, while others can only be activated during very specific events that occur within the Damage Step.

Please refer to Pgs. 34-36 of the rulebook (ver. 7.0) before reading this post.



Start of the Damage Step

Some cards have effects that activate at the start of the Damage Step. Monsters like “Steamroid”, “Rampaging Rhynos”, “Crystal Beast Topaz Tiger”, “Etoile Cyber”, “Super Robolady”, “Super Roboyarou”, “Black Veloci”, and “Jain, Lightsworn Paladin” with Continuous Effects that are applied when attacking a monster, attacking directly, or being attacked are applied at this time without starting a Chain.



Some monsters have Trigger Effects that activate when attacking a face-down monster and start a Chain at this time because they do not flip the face-down monster face-up, like “Neo-Spacian Grand Mole”, the “Mystic Swordsman” cards, “The Six Samurai – Irou”, “Razor Lizard”, “Sasuke Samurai”, and “Sasuke Samurai #4”. Each of these effects destroys, etc. the monster without flipping it face-up or applying damage calculation.



The effect of “Nanobreaker” starts a Chain if it is attacking a face-up Level 3 or lower monster. “Disciple of the Forbidden Spell’s” effect starts a Chain if it is attacking a face-up monster with an Attribute that was selected by its effect. “Ninja Grandmaster Sasuke’s” effect activates if it attacks a face-up, Defense Position monster. (These effects won’t activate if the opponent’s monster is face-down)



Effects that increase, decrease, halve, or double the ATK and/or DEF of a monster can be activated at this time. This includes cards like “Shrink”, “Limiter Removal”, “Rush Recklessly”, “Rising Energy”, and “Mirror Wall”, though it is uncommon to do so.





Flipping the Face-Down Monster Face-Up

If the monster being attacked is face-down, it is flipped face-up at this time. If the monster has a Flip Effect or a Trigger Effect that activates when it is flipped face-up, the effect will not activate at this time.



If the flipped monster has a Continuous Effect that is active while it is face-up on the field, the Continuous Effect is applied at this time. This includes the Continuous Effects of monsters like “Star Boy”, “Hoshiningen”, “Jinzo”, and “Spell Canceller” that apply as long as the monster is face-up on the field. Effects that would prevent the flipped monster from being attacked, like “Command Knight’s” effect, are not applied at this time, because the monster is already being attacked. If the monster survives the battle, its effect will be applied against any following battles.



Sometimes the flipped monster will have a Continuous Effect that causes it to "self-destruct" if proper field conditions are not met ("Giant Kozaky", "Zombie Mammoth", "Thunder Nyan Nyan", etc.) When this occurs, the monster is not immediately destroyed. Damage calculation is still conducted. If the monster is destroyed by the battle, its effect is not applied. If the monster survives the battle, it is destroyed by its effect after damage calculation.



Effects that increase, decrease, halve, or double the ATK and/or DEF of a monster can be activated at this time, though it is uncommon to do so.





Before Damage Calculation

The effects of cards like “Drillroid” and “Ehren, Lightsworn Monk” activate at this time, after the face-down monster has been flipped face-up and before damage has been calculated. Sometimes these effects will state something similar to “without applying damage calculation”, which means that damage calculation will not occur and will actually be skipped over. (The remainder of the Damage Step that occurs AFTER damage calculation will continue as normal)



Cards like “Blast Sphere”, “Adhesive Explosive”, “Kiseitai”, and “Ancient Lamp” have effects that activate when they are flipped face-up by an attack and their effects are activated at this time. These cards typically have effects that state that they are activated without applying damage calculation.



The damage-inflicting effects of “Reflect Bounder”, “Yubel”, and “Yubel – Terror Incarnate” are also activated at this time.



Effects that increase, decrease, halve, or double the ATK and/or DEF of a monster are typically activated at this time. You are allowed to have multiple Chains for the use of activating these types of effects. If you activate “Rush Recklessly” and it is negated by your opponent’s “Magic Jammer”, you can start another Chain by activating “Rising Energy”, etc.



"During Damage Calculation"

Some effects in the Yu-Gi-Oh! TCG are applied “during damage calculation”. Damage calculation is a specific event in the Damage Step during which we compare the ATK and/or DEF of the monsters in battle and inflict Battle Damage, if appropriate, following the rules on Pages 35-36 of the rulebook (Version 7.0). Some effects are applied during this very specific event, like “Injection Fairy Lily” and “Kuriboh”, begin a Chain, while Continuous Effects that are applied during damage calculation do not.



We only get one Chain with which to activate effects that are activated "during damage calculation". Only effects that are activated "during damage calculation" and effects that negate them, such as Counter Trap Cards and the effects of cards like “Herald of Orange Light” and “Light and Darkness Dragon”, can be activated at this time. Effects that increase, decrease, halve, double, etc. the ATK and/or DEF of a monster cannot be activated at this time, unless they are specifically allowed to be activated "during damage calculation". This means that cards like “Shrink”, which are not specifically activated "during damage calculation", cannot be activated, while “Injection Fairy Lily’s” effect can be activated.



Any Continuous Effects specific to damage calculation are applied (turn on) before the “during damage calculation” Chain begins, but some can be applied or disappear during the Chain’s resolution if the conditions of the battle change (ATK/DEF change, Life Point change, etc.) After the “during damage calculation” Chain has finished resolving and all appropriate Continuous Effects have been applied, the results of the attack are determined and any resulting Battle Damage is inflicted.



If a monster is destroyed by a card effect during damage calculation (“Divine Wrath”, etc.), any remaining effects on the Chain finish resolving. After the Chain finishes resolving, damage calculation stops. No battle damage is inflicted and neither monster is destroyed by the battle. The monster that is destroyed by a card effect is not considered to have been destroyed by battle, because damage calculation stopped and this determination wasn’t made. The remainder of the Damage Step continues as normal.



“Honest” is a bit odd, because it can be activated anytime from the start of the Damage Step up to and including damage calculation. A player’s ability to respond to its effect will depend on when “Honest’s” effect is activated. Some card texts do no indicate that a card can be activated during damage calculation, but their card rulings do, like “Injection Fairy Lily” and “Honest”. Be sure to check the FAQ and Judge Forum if you are uncertain. (Keep in mind that a very, very small number of cards use this specific portion of the Damage Step.)



Example 1: Injection Fairy Lily and Rising Energy

Player A has “Dark Magician” in Attack Position and "Rising Energy" set in his Spell and Trap Card Zone. His opponent has “Injection Fairy Lily” in Attack Position. Player A attacks “Injection Fairy Lily” with “Dark Magician”. During damage calculation, Player A’s opponent activates “Injection Fairy Lily’s” effect. Player A cannot chain “Rising Energy” to increase the ATK of “Dark Magician”.



Example 2: Injection Fairy Lily and Divine Wrath

Player A has “Goyo Guardian” in Attack Position and “Divine Wrath” Set in his Spell and Trap Card Zone. His opponent, Player B, has “Injection Fairy Lily” in Attack Position. Player A attacks “Injection Fairy Lily” with “Goyo Guardian”. During damage calculation, “Injection Fairy Lily’s” effect is activated. Player A chains “Divine Wrath” to negate the effect of “Injection Fairy Lily” and destroy it. Damage calculation stops, no Battle Damage is inflicted to Player B’s Life Points, and “Goyo Guardian’s” effect does not activate because “Injection Fairy Lily” was destroyed by the effect of “Divine Wrath” and not by battle. The remainder of the Damage Step continues as normal.



Example 3: Injection Fairy Lily and Skyscraper
Player A has “Skyscraper” in her Field Spell Card Zone and “Elemental Hero Wildedge” in Attack Position. She attacks her opponent’s Attack Position “Injection Fairy Lily”. During damage calculation, her opponent activates “Injection Fairy Lily’s” effect, increasing its ATK to 3400. After “Injection Fairy Lily’s” effect resolves, “Skyscraper’s” Continuous Effect is applied to increase the ATK of “Elemental Hero Wildedge” to 3600.



Example 4: Honest Vs. Honest

Player A has “Honest” in his hand and “D.D. Warrior Lady” in Attack Position. His opponent, Player B, has “Honest” in her hand and “Blue-Eyes White Dragon” in Attack Position. Player A attacks the “Blue-Eyes White Dragon” with “D.D. Warrior Lady”. During damage calculation, he activates the effect of “Honest”. If Player B wants to activate the effect of their “Honest”, they would need to chain it. They cannot wait until after Player A’s “Honest” resolves and start another Chain, because when the current Chain finishes resolving damage will be calculated and the timing to activate the effects of cards like “Honest” will have passed.





Battle Damage is Inflicted - After Damage Calculation

If the flipped monster had a "self-destruct" effect ("Giant Kozaky", Zombie Mammoth", "Thunder Nyan Nyan", etc.) and it has survived the battle, it is destroyed by its effect at this time if its proper field conditions are not met.



Some cards have effects that activate when Battle Damage is inflicted to a player’s Life Points. Cards like “Don Zaloog”, “Spirit Reaper”, “Doom Dozer”, “Kycoo the Ghost Destroyer”, “Sasuke Samurai #3”, “Evil Hero Wild Cyclone”, and “Magna Drago” activate at this time. The effect of “Red Dragon Archfiend” that destroys every Defense Position monster on the defending player’s side of the field also activates at this time. If the attack was a direct attack, the Spell Card “Sebek’s Blessing” may be activated.



"Attack and Receive", "Numinous Healer", "Damage Condenser", and the effect of a face-up "Damage = Reptile" may be activated at this time.



We have one exception, which is entirely rulings-based: “Flashbang”. “Flashbang”, if activated, is actually activated before the effects of cards that activate when Battle Damage is inflicted to a player’s Life Points, and if its effect resolves properly the effects of cards that activate when Battle Damage is inflicted will not activate, because the turn ends.





Activating the Flip Effect of the Flipped Monster and a few Guest Stars

After damage calculation, the infliction of Battle Damage, and any effects that activate as a result, the Damage Step has a section devoted to dealing with the Flip Effect of the Flip Effect Monster that was flipped face-up by the attack. If the flipped monster had a Trigger Effect that activates when the monster is flipped face-up (“Royal Keeper”, “Nightmare Penguin”, etc.), it will be activated at this time.



The Trigger Effects of “D.D. Warrior”, “D.D. Warrior Lady”, and “D.D. Assailant” activate at this time. If “Wall of Illusion” was attacked, its Trigger Effect activates at this time.



If a monster destroyed by the battle has a Continuous Effect that is applied while the monster is face-up on the field (“Jinzo”, “Spell Canceller”, etc.), the Continuous Effect is no longer applied. Continuous Effects that change where a monster goes when it is removed from the field at the end of the Damage Step are unaffected (“Crystal Beast” monsters, “Dark Magician of Chaos”, etc.).



If the Flip Effect of the flipped monster targets, you cannot select a target that has been destroyed during damage calculation. (Ver. 7.0 rulebook, Pg. 34)





End of the Damage Step - Monster(s) Destroyed by Battle are Sent to the Graveyard

Monsters that have been destroyed by battle are now sent to the Graveyard. If the monster destroyed by battle has an effect that activates when it is destroyed by battle and sent to the Graveyard, its effect starts a Chain. Effects that can be activated when a monster is destroyed by battle and sent to the Graveyard (“Tualatin”, "Desrook Archfiend", “Green Baboon, Defender of the Forest”, “Time Machine”, “Destiny Signal”, “Domino Effect”, etc.) may be activated/chained at this time. A monster that activates its effect when it destroys a monster by battle and sends it to the Graveyard (“Hydrogeddon”, “Elemental Hero Flame Wingman”, etc.) are also activated at this time.



If the effect of a card like “Macro Cosmos” is active, a monster destroyed by battle will be removed from play instead. Some monsters like “Apprentice Magician” will still activate their effect if they only need to be “destroyed by battle”, and not the stricter requirement of “destroyed by battle and sent to the Graveyard”. Monsters with effects that activate when they destroy a monster by battle, without the additional requirement of “sending it to the Graveyard” (“Fenrir”, etc.), will also activate at this time.



A Counter on a “Crystal Core” monster or on “Big Core” is removed. If “Des Mosquito” was destroyed by the battle, 1 counter is removed. If “Spacegate” is active, 1 Gate Counter is placed upon it if the opponent’s monster attacked or was attacked.



Some effects are given specific allowanced by Konami that allow them to be activated at this time, like “Michizure” and “Chthonian Blast”. Cards such as these will typically have a ruling on the FAQ mentioning that they may be activated during the Damage Step, and they usually apply at this time.



The effects of cards like "The Six Samurai - Zanji", "Ryu Kokki", "Getsu Fuhma", "Rallis the Star Bird", "Ancient Gear Engineer", "Chainsaw Insect", and "Gonogo" are applied at this time.





(We may have older rulings that don't reflect this. If you think a ruling may contradict this, please send me a PM. It will be more difficult to see your message if you send it via responding to this post.)

Interesting, and sometims important.

I.E, let's talk about Honest, that can be used anytime during the damage step.
If you play B chains a Honest to Player A's Honest, Player A wins,
since the chain resolves backwards:

Player B's Honest resolves --> Player A's Honest resolves -> Player A's monster is the strongest.

Since Honest can also be used at the start of the damage step, and also in in the damage calculation, if playerr A uses his Honest in the start of the damage step, and Player B waits until Damage Calculation and activates his, Player' B's Honest actually wins:

Player A's Honest resolves in the start of the damage step -> Player B's Honest Resolevs later, in the Damage Calculation part.

Since this wasn't a chain, the latest Honest actually won!

---

How can we take advantage over this, then?

Given that 'Player A' is the player whose this turn is, and 'Player B' is the other player:


1) Since this is the turn of 'Player A', he has priority. This means he has the right to be the first one to pull Honest.

How do you do that?
In the right time, ask your opponent: "Can we now proceed to the Damage Calculation?"
Doesn't matter if he says: "No, I want to do this or that first" or aprroves,
the moment you both agreed that The Damage Calculation srtarted, you drop yoru honest, and you have the priority to be the first one.

Make sure you don't verbally give the opponent the chance to do something before dropping your honest, because this can mean that you passed Priority.

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Now, what if you are Turn B?

Hope that your opponent (Turn A Player) doesn't know what that we know.
Assuming he isn't that good in those stuff, he isn't going to say anything about the start of the damage step, or the damage calculation stuff.

If he has a honest and he wants to drop it first, he will just drop it.

Now, after he dropped it, you ask: "Can we procceed to the Damage Calculation?"
If he actually understand what that's gonna happen, he should say something like: "Dude, we are actually in the Damage Calculation already. That's when I dropped my Honest".

But if he doesn't, and he approves that we can: (can procced to the Damage Calculation)
That's when you wait until he verbally passes his priority (I.E: He wouldn't do anything, and then ask you what you are waiting for).

Now make sure that he passes it: "Oh, are you waiting for me? Can I act?" and drop your honest.
Hope that the judge around will understand what happened, because your opponent will probably rage, whine and call him...

Player A has “Goyo Guardian” in Attack Position and “Divine Wrath” Set in his Spell and Trap Card Zone. His opponent, Player B, has “Injection Fairy Lily” in Attack Position. Player A attacks “Injection Fairy Lily” with “Goyo Guardian”. During damage calculation, “Injection Fairy Lily’s” effect is activated. Player A chains “Divine Wrath” to negate the effect of “Injection Fairy Lily” and destroy it. Damage calculation stops, no Battle Damage is inflicted to Player B’s Life Points, and “Goyo Guardian’s” effect does not activate because “Injection Fairy Lily” was destroyed by the effect of “Divine Wrath” and not by battle. The remainder of the Damage Step continues as normal.

I have a question involving this example: since lily got destroyed by card effect, does a replay occur?

Quote :

I.E, let's talk about Honest, that can be used anytime during the damage step.

No, not after damage calculation (literally)

Quote :

I have a question involving this example: since lily got destroyed by card effect, does a replay occur?

No, it doesn't. Replay occurs, only if turn-player's opponent monster come/gone before entering damage step.
#check the rulebook, Google it if necessary.

Quote :

If a monster destroyed by the battle has a Continuous Effect that is applied while the monster is face-up on the field (“Jinzo”, “Spell Canceller”, etc.), the Continuous Effect is no longer applied. Continuous Effects that change where a monster goes when it is removed from the field at the end of the Damage Step are unaffected (“Crystal Beast” monsters, “Dark Magician of Chaos”, etc.).

the 5th and 6th section need an update about when continuous effect stop applying.
http://www.pojo.biz/board/showpost.php?p=18090296&postcount=29

The article is good, very needed, but take note that this is the weirdest part of the game so there is much to talk about. I was thinking of making an article about the Breakdown of the Battle Phase myself, so I can think about the research you have to make to do it right.

Before you go into an important duel, always have the substeps open in your tabs.

thanks for this cause alot of people dont know how it works

honestly all you need to know about the damage step can be found on this article as well
http://yugioh.wikia.com/wiki/Damage_Step

Rand wrote:

honestly all you need to know about the damage step can be found on this article as well
http://yugioh.wikia.com/wiki/Damage_Step

What you posted is far different from what he talked about. The damage step is made by 7 substeps, in which you can activate different card effects depending on the substep you are in, and if it's possible to have more than one chain in the substep.
http://yugioh.wikia.com/wiki/Breakdown_of_the_Battle_Phase is the thing he talked about, but again, that is the most complex thing in the game, there are so many things that are needed to be said, cause of the individual card rulings.