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Deals damage and has a critical hit rate one stage higher than normal. Assuming there are no other critical hit modifiers in play, this move has a 1/8 chance to get a critical hit instead of a 1/16 chance.
For various reasons, including its movepool distribution, Psycho Cut is mostly seen in RU and NU, where Psychic-type and Dark-type physical attackers roam. Gallade, Medicham, and Absol love using this move to destroy Poison- and Fighting-types, as the former of which resist the Fighting-type STABs of Gallade and Medicham, while the latter of which resist Absol's STAB. Psycho Cut's main advantages over the similar Zen Headbutt are its 100% accuracy and its non-contact property, which prevents abilities like Mummy, Static, and Cute Charm from activating. The increased critical hit ratio can also be useful.
Zen Headbutt is a slightly more powerful option with a 20% chance to flinch the target.