Knife literally raised in fight (8)
I believe the answer is:
stiletto
'knife' is the definition.
(stiletto is a kind of knife)
'literally raised in fight' is the wordplay.
'literally' becomes 'lit' (abbreviation, eg in translations).
'raised' says the letters should be written backwards (going up in a down clue).
'in' is an insertion indicator.
'fight' becomes 'setto' (set-to is a kind of fight).
'lit' reversed gives 'til'.
'til' placed inside 'setto' is 'STILETTO'.
(Other definitions for stiletto that I've seen before include "Thin blade" , "Bedspread" , "High-heeled shoe" , "Dagger; tapered heel" , "Pointed arm" .)