Yeah, there are lots of misconceptions going around regarding retaliate. It has absolutely nothing to do with your weapon and will proc even if you have ranged weapon, only shield, etc equipped. It's very similar to Wizard's 4th lvl spell Flame Shield and works pretty much the same as a thorns effect.
Base damage of retaliate is 10-15 piercing. Generic and generic melee dmg modifiers/talents/abilities apply so MIG dmg bonus, dmg bonus from Blessing, Cipher's dmg bonus from whip, Vulnerable Attack, Savage Attack, One Stands Alone and Carnage apply. Didn't test Rogue, but dmg bonus from sneak attack probably applies. Retaliate procs on melee hits (graze/hit/crit) from enemies and always hits (no accuracy roll). Enemy DR applies, but 0.2x min damage applies just like normal attacks. I managed to proc it from touch-attack type spells like Jolting Touch and some single-target spells like Priest's Barbs of Condemnation though so needs some more testing in that regard. Ciphers get focus from retaliate attacks.
Wizard's Flame Shield, Paladin's Fires of Darcozzi Palace and Fire Godlike's Battle-Forged are pretty similar, but will roll accuracy so can miss/graze/hit/crit. Base damage is 10-15 burn dmg for Flame Shield and 5-10 burn dmg for FoDP and 2 burn dmg/lvl up to a 24 burn dmg at lvl 12 for Battle-Forged. Otherwise same as retaliate.
Edited by temek, 18 April 2015 - 10:25 AM.