Great dialogue covers a multitude of writing problems, no doubt.
Much of the writing advice given today, of course, is based on trends currently in vogue. Older books, for example, contain dialogue that is much, much longer than we are used to. The advice today is to cut dialogue to the bone.
This is due to the influence of cinema. In film, if a character goes on and on reciting half a page of dialogue it looks, well, ridiculous, even if the same lines are enjoyable to read in print.
Remember too that we ourselves, all of us, are also heavily influenced by film and TV, so it may be our first impulse to write "visually," keeping dialogue as parsimonious as if it were a screenplay. But a book is NOT a screenplay and there's no real reason you should feel pressured into making it sound like one, forsaking the many benefits of print over audio-visual media. It is simply the current fashion. Spare dialogue is also easier to read on the page.
Much writing advice, however, is more timeless, such as that dialogue should always serve the purpose of advancing the story.
Dialogue is also a wonderful way to to reveal character traits, surprises, and/or create suspense.
Most importantly, John Steinbeck, who wrote some of the best dialogue ever, said the secret to great dialogue is to "...say it aloud as you write it. Only then will it have the sound of speech."
Tips for stepping up natural, credible dialogue:
1. Strive to make dialogue QUOTABLE. Universal truths and the unexpected comment usually work, particularly when the writing is organic.
"Maybe ever’body in the whole damn world is scared of each other." John Steinbeck, Of Mice & Men
2. Let strong dialogue speak for itself by sticking with "she said" or "he said" or "they said," preferably at the end of the quote. Or skip the tags altogether.
Although it's very common, varying the tag just to vary it, tends to distract:
"she replied"
"he confessed"
"he countered"
But if the tag adds meaning, you can use it:
"he sighed"
"they snickered"
3. Subtle dialogue is much more interesting than boring, stagnant on-the-nose dialogue, but even the best writers sometimes do it. On-the-nose dialogue can paint you into a corner with nowhere else to go. It's dancing by the numbers, not the rich full dancing of a great artist, like Alvin Ailey.
Tools at your disposal are:
a) subtext -- insincerity, ignoring manatee under the carpet
b) obfuscation -- talking to distract or conceal
c) hints -- small hints may suffice
e) irony -- saying the opposite of what is meant
d) silence -- don't forget, it's always an option!
Exer: Write a scene about what isn't being said.
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Dialogue is my favourite part of story writing. I love the advice here...and try to stick to it as much as possible. There's more to the "dangling conversation" than just coming right out and saying it.