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A creature enters martial trance when it is fighting multiple enemies at once. The trance offers a boost to the creature's abilities - a creature in a martial trance has a significantly increased chance of blocking or parrying an attack, and is more likely to hit their opponent. However, it does not give a direct damage bonus like enraged. The symbol for a dwarf in a trance is
! which will flash over his icon.
Dwarves are the only creatures which enter martial trances without modding, the RAW tag which determines this is [TRANCES]. A dwarven adventurer may also enter a martial trance in Adventurer mode. Fresh recruits can, when pressed to fight, go into martial trance as well.
This is also a great way to dispose of Bogeymen in adventurer mode, as you can dodge most of their attacks and most of your attacks will land successfully regardless of the difficulty of the shot.