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Priority: Priority indicates whose attack will hit first. In almost every instance the computer will out prioritize your attacks. This was done to ensure that you would be continuing at least once. This is a term coined (pardon the pun) quarter insurance. What this means is that the computer can throw you from greater ranges, has more invincibility frames than you when it gains them, and it gets more powerful when it is losing. The computer is NOT designed to play fair. If it did, Capcom wouldn't have made any money off the machine, of course! The computer's tactic is to spam high priority moves and it will do this blatanly when it is losing. It also gains invincibility frames during moves that SHOULD be a hit when it is losing too. Therefore... attack your opponent when they are vulnerable. It seems cowardly but... the computer doesn't fight fair so neither should you.
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Timing: In 2D fighting games learning WHEN to attack your opponent is just as important as HOW you attack them. It's a sad fact in 2D fighting games but attacking your opponent during their lag time is the most effective method of winning. For example, Balrog's Turn Punch takes an ATROCIOUS amount of time both to charge AND to use and your opponent can EASILY knock you out of it. Another example of timing is when Ken and Ryu use Hadouken. During that move they are vulnerable as they are using it so it is easy to jump over the move and nail them with your choice of close range moves. In this instance, projectiles would NOT be appropriate as jumping toward them would put you from Half-Screen distance to Close Range. Yet another example would be when an opponent jumps into the air. This is the TIME to use the attack that SF veterans call anti-air attacks. This is to punish your opponent for jumping at you like an idiot.
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There are a number of things it takes to master this game. Some of the most important ones are: Spacing, Timing, and Priority. I will briefly explain each one. Most of you 2D fighting game veterans already know these tactics but for the ones who don't here they are.
Spacing: There are 3 important ranges in SFII CE: Full Screen, Half-Screen, and Close Range. Projectiles are best used at Full/Half Screen distance. Not advised up close because of charge time. Being far from your opponent means you cannot hit them and they cannot hit you (Unless they nail you with a projectile). The basic idea behind Spacing is that... certain moves cannot hit at certain ranges and certain ones can. For example, Ken/Ryu's Hadouken can hit at ANY range whereas their throws can only be used at close range (the CPU can out range you during throws.
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Against Bison: Thank God that Bison doesn't have his Street Fighter Alpha 3 X-ism or this game would be over before it started! When fighting Bison be very careful. Bison will usually use Psycho Crusher when you're landing from a jump. He uses the Stomp Kick most of the time followed by the falling palm thrust afterward. Block these. Hurricane Kick is usually effective but be careful when you use it or he'll counter with a high-priority jump kick. Bison isn't usually difficult to beat if you are CAUTIOUS. He uses his Hard Kick most of the time and it has HUGE range on it. Jumping around a lot is unadvised because of the aforementioned Psycho Crusher.
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Against Sagat: LOW ATTACKS! Sagat is VERY tall so he is easy to hit. He will usually back off and start throwing Tiger Ball Shots at you. Unlike Ryu, however, who can only throw his Hadouken's high, Sagat can throw his Tiger Ball Shots high AND low. Beware of that. ONLY jump at Sagat when he is in the middle of his Tiger Ball Shot HIGH. He'll usually have enough time off the low one to knock your teeth out with a Tiger Uppercut. Be aware that Tiger Uppercut hurts quite a bit. If you can do a stand/duck teaser you may be able to trick Sagat into using his Tiger Uppercut, blocking it, and then throwing him accordingly. He has a much larger hitbox than Ken though so... be cautious. Sagat is no pushover. He also uses a kick at close range that hits twice up high so block it if possible. Low sweeping kicks seem to ruin Sagat most of the time but be careful of his ducking Hard Punch.
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Addendum for ALL opponents: Be careful when your opponent is getting up from a throw. They have invincibility frames and you'll get hurt. Addendum for Vega: Vega has invincibility frames when doing his Somersault so keep that in mind.
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Against Balrog: Balrog's specials have no lag on them unlike yours. Beware of his Dash Punch as he often uses it many times in a row. Crouching can ruin Balrog's day as he usually cannot attack low. He is VERY aggressive, however, so make SURE you have your finger on that block button. Low attacks are the way to go here.
Against Vega: Vega's speed can be devastating and you may have to fight him more than once. When you're dizzy expect a Rolling Claw. You'll notice a fence in the background on the Spain stage. Vega will jump onto it from time to time and use Claw Dive. He can mid-air suplex you from this jump so if possible nail him with Dragon Uppercut to knock him out of the air or merely jump backward. Vega also likes to use low sliding kicks so beware of those too. Hurricane Kick is advised.
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Addendum for Honda, Blanka, and Chun Li: Watch out for the Hundred-Hand Slap, the Electricity, and the Infini-Kick. They're heavily damaging.
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Against Dhalsim: He has you on reach so be careful of his high kick. He uses his Corkscrew attack quite frequently so block when possible. Be wary of Yoga Flame and Fire especially during a jump. Dhalsim isn't very hard. Hurricane Kick usually wins the day here.
Against Ryu (CPU): He will spam Hadouken a lot. Be wary of jumping as he prefers to jump kick. He doesn't use Shoryuken a lot nor does he use his Hurricane Kick much either. Wait till he fires off a Hadouken and then use a jump kick/sweep kick combo. If you can dizzy him hit him with Hurricane Kick or Dragon Uppercut.
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Against Chun-Li: Chun Li likes to jump a lot. Use your crouching Fierce Punch to knock her out of the air. Beware of low kicks and the Spinning Bird Kick. Hadouken is useless as she jumps a lot. Don't jump too much. Also beware of her stepping on your head when she jumps.
Against Zangief: Do not get anywhere NEAR Zangief or you will eat a Spinning Piledriver for massive damage. If you trap him in a corner, he will usually use Spinning Lariat to get free. He can throw you from a much greater distance than you can so stay away from him if possible. Use Hurricane Kick and Hadouken (medium or soft). His low kicks have high priority so be careful when attacking low.
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Against Guile: Watch out for Sonic Boom. He has no charge time between them so... be careful or cancel them out with Hadouken. Don't jump toward him in the corner or he'll nail you with a Flash Kick. Be wary, and block low sometimes because he likes to use his double sweep kick. You can trick him into an infinite Flash Kick-Shoryuken loop if done correctly. Throw him when the opportunity presents itself.
Against Ken: Ken will use Shoryuken a lot. Jump his Hadoukens but be careful of jumping TOWARD him or he will knock you out of the air with Shoryuken. His Hurricane Kick hits numerous times unlike Ryu's which only hits once. Be also aware that his Shoryuken can travel all the way across the screen nearly. If you can jump toward him from the opposite side, trick him into using his Dragon Uppercut and then throw him when he hits the ground.
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Character specific strategies (Playing as Ryu):
Against E.Honda: Not much to say here. He uses his karate chop maneuver as an anti-air. Use Hurricane Kick and Hadouken to soften him up. Throw when possible. When he's dizzy nail him with a Shoryuken if you can. If not, throw him. Honda isn't hard.
Against Blanka: Don't jump too much. His jump kick has higher priority than yours. He also uses his flip kick to knock you out of the air. Hurricane Kick works well here. Don't spam Hadouken. He'll just jump it. Try to trap him in a corner. If he blocks jump away.
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To beat zangief, stand at the left edge of the map, keep jumping and pressing C. It'll peel down his health. To beat balrog, if playing as Ryu or Ken, keep yourself crouched, and spam light kick.