Sword Gauge is employed in:
At the start of every match the Sword Gauge is full. When the player does a slash attack (wherever if hits the enemy or not) or a move that hits the opponent (slashes, kicks, special moves, and unarmed punches), the gauge loses certain portion of energy. This means that, while the Sword Gauge it’s lower than 100%, the potential damage will be below normal. The player can continue making attacks but the gauge will continue to decrease too; the lower the Sword Gauge gets, the lower damage becomes; in Samurai Shodown 64 if the Sword Gauge reaches zero, the player’s character becomes stunned for an instant. The gauge refills automatically if the player does nothing for a brief moment (it takes longer as it approaches 100%), but if the player performs certain moves the refill pauses momentarily.
In Samurai Shodown V and Special, while a player has the Rage Gauge at MAX, the Sword Gauge increases its length. With the Explosion Gauge active, the Sword Gauge grows even more. In both cases, the potential damage increases, since the gauge it’s able to fill up beyond the normal length.
The reason of this feature is to prevent the classic misuse of the “button smash” playstyle; the battles become more unhurried and methodical, and each player must wait for the best chances to do more effective attacks.