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Although he’s considered a great military leader, largely for having retaken Jerusalem from the Crusaders in 1187, Saladin’s career as a general was not without its setbacks. Richard the Lionheart defeated him a few times during the Third Crusade, for example, though ultimately that crusade failed to achieve its goal. And there’s also the 1177 Battle of Montgisard, in which Saladin’s first attempt at capturing Jerusalem was decisively ended in what is now central Israel by an outnumbered Crusader army under King Baldwin IV.
Baldwin, by the way, is one of the most remarkable of all the Crusaders in my opinion. Suffice to say they didn't call him the “Leper King” for fun. That he survived long enough to rule Jerusalem at all is pretty incredible. That he not only ruled, but was able to lead (successful) armies in the field is really astounding.
Just how badly the Christians were outnumbered at Montgisard is anybody’s guess, because medieval sources only count the number of knights in Baldwin’s army, and that only amounted to something shy of about 400 men, many of them Knights Templar. Obviously Baldwin didn’t defeat Saladin’s army, variously listed at anywhere from around 8000 to 26,000 men, with 400 guys, and we know that medieval European armies included lots of fighters who were not knights, but nobody bothered to count those fighters in this case. Still, it seems likely that they were, in fact, pretty significantly outnumbered. They were so badly outnumbered that in Baldwin’s first attempt to stop Saladin’s march toward Jerusalem, at Ascalon, Saladin simply detached part of his army to occupy Baldwin and kept right on marching.
In fact, Saladin’s overconfidence about the size of his own army seems to have been part of his undoing. Instead of making a beeline for Jerusalem, which was obviously the main prize both from a tactical and religious standpoint, he decided to take his time and nab a couple of the towns and fortresses along the way. Meanwhile, Baldwin was able to escape Ascalon and go after the main body of Saladin’s army. The two forces met somewhere near Ramla, a strategically important point that sat at the crossroads of the Cairo-Damascus highway and the main road from Jerusalem to its port at Jaffa (today it’s an Israeli city of about 70,000 people).
The story goes that Baldwin and his army took Saladin’s forces by surprise, as they were preoccupied trying to dislodge their baggage train from the mud. Saladin’s army was scattered all over the place—some working on the baggage train and others out foraging for supplies and raiding in the countryside. Baldwin was no dummy, so he ordered his men to attack immediately. We’re told that Baldwin, as weakened as he was by his condition, fought right alongside his men—which, as it would for Henry V at the Battle of Agincourt in 1415, had an inspiring effect on his army.
Saladin managed to hop on the back of a fast camel and make a break for it, but his army was cut to pieces. His losses can’t be accurately measured, but estimates are that he returned to Egypt with around ten percent of the soldiers with whom he’d left. Some of the 90 percent he lost may have deserted, but I think it's safe to say that the vast majority were killed. Unfortunately for the Crusaders, Saladin's position in Egypt and Syria was a lot stronger than theirs in Jerusalem and the other Crusader states, and it only took him a couple of years to build up a new army and start harassing the Crusaders again. In 1182 he launched a new campaign to capture Jerusalem. Baldwin finally succumbed to his illness in 1185 and was eventually succeeded by a much less capable king, and as a result Saladin's efforts finally proved successful.