Knowing when to retreat can be a problem, but does not need to be one.  The DM is the window between the characters who are experiencing the world and the players.  There's a lot of information that is often glossed over but is very useful for that sort of thing.
"The giant humanoid swings at you with a two handed axe, hitting for 14 points of damage."
vs.
"The giant humanoid swings negligently at you, almost losing grip on the two handed axe with it's poor form - but that is still enough to easily penetrate your armor.  Luckily this hit was light for such a massive weapon, only doing 14 points of damage."