Basically, the player who lands the first attack has the initiative. Initiative switches on misses or successful blocks/parries. I’ll try to explain with an example.
Player A uses a 2 handed Hammer and hits Player B in the face with it. B is caught off guard by the attack.
Now Player A can continue to attack and B will almost never be able to get in a counterattack, not even with the hunting knife, because he will be “interrupted” by A’s attacks. In order to gain the initiative B has to either block/parry an attack or make A miss an attack in some way.
As soon as he does that, he can counterattack and now A will not be able to do anything unless B misses or is blocked/parried.
There are exceptions, mostly from lag/ping, but by remembering this rule you can win a lot of fights against people who only try to counter attack you, always failiing even with the fastest weapons.
Now parrying only lasts for a short time and there is a delay before you can parry again, so an experienced player only has a wait about a second and then counterattack, guaranteeing a hit.
You should only parry when you see the attack coming, usually you have plenty of time to do so. Blindly parrying will not only be ineffective against experienced players, it will get you killed a lot even against newbies who counterattack late.
This might be self-explanatory but just look around you on any public server and you will see lots of people making this mistake.
The most important rule here is to avoid reflex parries and just play as if there was distance between you. The mechanics do not change with distance, and if you really need some space just parry->kick.
If your parry timing is off, i.e. you parried too early and now are being hit, just take one attack and start parrying again. Worst that can happen is you die.
If you see someone charging you and starting a swing well out of reach, either backpedal or just try to parry it. The “stab” attacks are sometimes able to hit you even while the weapon is pulled back, so unless you are 100% sure the enemy won’t reach you just parry.
Worst case you will have to parry another attack in order to gain back initiative.
Naturally, this is a lot easier with long reach weapons. The advantage is that your counterattack is a lot harder to parry and there is no delay for you to start attacking. It also give you the initiative.
If you do not use a shield and your enemy starts feinting, you have two options. You can either delay your parry until you’re sure their swing comes through, which is extremely hard to correctly predict depending on their weapon, or you can try counterattacking as soon as you see your opponent move his weapon.
If he is feinting you will get in a free hit, if he is not there is at least a chance you will hit first and gain initiative.
A good way to improve your skills is playing on one of the duel servers where you can have uninterrupted 1vs1 fights.
Good luck and have fun in this great game =)