When parrying a weapon bare handed, you do not parry at -3. Instead, if you succeed on your parry by a margin of 3 or less, you simply interpose your arm into the path of the weapon and you take the full force of the blow to your arm. If you are attacked from the right, it will be your right arm that is hit; from the left, your left arm will be struck. If attacked from in front, you get to choose which arm to use when parrying.
Parrying with a knife likewise does not suffer a -1 to parry. Rather, if you succeed with a margin of success of 1 with a knife parry, the blow strikes your weapon arm for full damage.
If you parry an unarmed strike with a weapon, your opponent gets a normal dodge or parry roll to avoid any damage your weapon may cause as a result of the parry intercepting his attack. This is a contest of your already rolled parry roll with the parry or dodge roll your opponent makes to see if you hit.
With any weapon, if you tie your opponent when defending with a parry, your opponent hits your parrying arm (realistically, most wounds in melee combat occur to the arm and hand).
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