When your characters speak, it must sound authentic and specific to them. The reader should get a sense of who’s talking just by hearing their dialogue. And yet this resembles little how people actually talk. Listen to any conversation – lovers flirting, an argument, an impassioned debate – write it down verbatim and read it back. Makes for terrible dialogue. You have to trim all the pauses, the repetition, the prosaic irrelevance. Everything your characters say must move the story forward, reveal character or act as exposition. Dialogue must be crisp and taut, pruned of extraneous flab. Read speech back aloud and ask yourself whether your character would say that. Not many people say: ‘I cannot understand why I sound so stilted.’ Use the contraction ‘can’t’ unless you’re writing a period drama.
Don’t be afraid to use ‘she said, he said’ all the time. Use ‘he espoused’, ‘she exclaimed’, ‘they quipped’ only if you’re sure your reader has a bucket nearby. Unless you’re conveying volume – ‘he shouted’ – ‘he said’ suffices and allows the author to remain invisible. And don’t qualify with adverbs too often: "Yeah, right," he said, sarcastically. This is telling the reader what to think of the dialogue; the speech itself should do that where possible. Worse still is using speech tags to develop character, as in “Go fuck yourself,” said the coarse, plain-speaking woman; or to point out the speaker’s state of mind: “Outrageous,” he said, aghast.
A sequence without tags can be powerful, as long as it remains clear who’s talking. (Nothing more irritating than having to track back to confirm the voice we’re hearing.)
Vary direct speech with reported speech to give your writing cadence and variety.
Be careful of characters telling each other things they clearly know. “It’s great to see you, as it’s been three weeks since the parachute jump, when you broke your ankle and we laughed in the ambulance as it rained outside.”
Avoid dialect or broken English unless absolutely necessary.
Study published writers to see how they use dialogue to advance the story, show you something about a character.