an ill-coloured bouquet;

by first appearance:

Anyway.

1. Indicate who's speaking as quickly as possible.

See difference between:

"Wait, does anyone have an extra eraser? I could swear I brought one, but I can't find it." "You can use mine. Though if you steal it, I will kill you." "Nice. I'm changing my brother's name to Gerry, is that okay?" "You had two weeks to come up with your backstory."

And:

"Wait, does anyone have an extra eraser?" Melanie asks. "I could swear I brought one, but I can't find it." "You can use mine," Jan says. "Though if you steal it, I will kill you." "Nice," Melanie says. "I'm changing my brother's name to Gerry, is that okay?" Annie says, "You had two weeks to come up with your backstory."

But this looks like talking heads in a blank void talking to each other, so, give the characters bodies and physicality, which brings us to rule 2.

2. no talking heads in void.

Though people do just sit around talking without doing anything else, it's not that interesting to read and also, gotta remember that readers can't see what you see in your head while writing. You gotta actually give them something to latch a mental image onto, so. Characters should move and emote. 

"Wait, does anyone have an extra eraser?" Melanie asks, rummaging through her bag. "I could swear I brought one, but I can't find it." "You can use mine," Jan says, nudging his own eraser over. It's in the shape of an old fashioned motorcycle. "Though if you steal it, I will kill you." "Nice," Melanie says and snatches it up to do quick edits on her character sheet. "I'm changing my brother's name to Gerry, is that okay?" Annie gives her a flat look. "You had two weeks to come up with your backstory."

Now you can sorta tell what they're talking about. Just don't go overboard - dialogue has a momentum and a rhythm, and too much description can overwhelm it.

3. Character Action and Character Dialogue go on the same paragraph.

See difference between this:

Melanie rummaged through her backpack.  "Wait, does anyone have an extra eraser? I could swear I brought one, but I can't find it." "You can use mine." Jackson nudged his own eraser over. It was the shape of a motorcycle. "Though if you steal it, I will kill you." "Nice." Melanie snatches it up to do quick edits on her character sheet. "I'm changing my brother's name to Gerry, is that okay?" Annie gives her a flat look. "You had two weeks to come up with your backstory."

And this:

Melanie rummaged through her backpack. "Wait, does anyone have an extra eraser? I could swear I brought one, but I can't find it." "You can use mine." Jackson nudged his own eraser over. It was the shape of a motorcycle. "Though if you steal it, I will kill you." "Nice." Melanie snatches it up to do quick edits on her character sheet. "I'm changing my brother's name to Gerry, is that okay?" Annie gives her a flat look. "You had two weeks to come up with your backstory."

Not only does it make the text way more cohesive and snappy but, once again, it's much more clear who is saying what - but even then, I prefer to use dialogue indicators. Text like this to me looks like maybe there's a voiceover going on or something.

4. No mixing and matching characters. One character per paragraph.

This is one of my most broken rules, but in general it's character per paragraph.

So, none of this:

Melanie rummaged through her backpack while Annie set up the DM screen. "Wait, does anyone have an extra eraser? I could swear I brought one, but I can't find it." "You can use mine." Jackson nudged his eraser over and Melanie snatched it up "Though if you steal it, I will kill you." Melanie begun making quick edits. "Nice. I'm changing my brother's name to Gerry, is that okay?" Beside her, Annie gave her a flat look. "You had two weeks to come up with your backstory."

Mixing and matching who's doing what like this makes it hard to see who's saying what, it makes the dialogue messy. However, this is fine.

While Annie set up the DM screen, Melanie rummaged through her backpack "Wait, does anyone have an extra eraser?" she asked. "I could swear I brought one, but I can't find it." "You can use mine." Jackson nudged his eraser over and Melanie snatched it up. "Though if you steal it, I will kill you," he added. "Nice. I'm changing my brother's name to Gerry, is that okay?" Melanie ask, grinning at the look Annie gave her. "You had two weeks to come up with your backstory," Annie says flatly.

Note that in mixing and matching like this, it's all the more important to point out who is saying what. In general though, I tend to minimise this sort of stuff.

5 is kinda rule 1 rehashed, but, again, indicate who is speaking upfront. Especially when there's a larger piece of dialogue.

Sometimes, people aren't actually reading - sometimes for various reasons they're using text to speech, or maybe someone does a podfic or something. Even in visual reading, when there's a big block of dialogue without indicators it can be hard to follow.

So instead of:

"If Melanie can change her background, can I add a cool uncle to mine? I want a cool uncle - like, a gunslinger or something. Or a wizard - oo, a wizard uncle! He can be creepy and vague and give me problematic spells!" Jackson says eagerly. 

I'd rather do:

Jackson puts his hand up. "If Melanie can change her background, can I add a cool uncle to mine?" he asks eagerly. "I want to give Kaiser a cool uncle - like, a gunslinger or something. Or a wizard - oh, a wizard uncle! He can be creepy and vague and give me problematic spells!"

Especially so when there's multiple characters talking and maybe one character hasn't been talking as much as the others - if they jump back into the discussion, it should be noted.

6. Limit your bits.

But as said before, every rule is made to be broken, and I break my own rules all the time. When I do it, though, it's generally for the bit, to make the text more interesting. Stuff like bits of dialogue without any indicators who is saying what to show that there's a faceless crowd speaking all at once, or two characters going back and forth, stuff like that.

"Jackson's dude has Main Character Energy," Melanie says solemnly. "Kaiser is the anime protagonist," Jan agrees. "We're just NPCs in his world." "The cheerleaders of his adventurers." "Founding members of his harem." They nod in perfect understanding and agreement.

For a couple of lines, exchanges like this can be fun - if the back and forth goes on for 12 lines, though, it will get tiresome.

There are other bits I do, and again, I break my own dialogue writing rules a lot for stylistic reasons to make the text more interesting or to give it better rhythm, or whatever. Sometimes, there's no dialogue at all, sometimes there's no indicators. There's no actual rules in writing, even grammar is all made up. These are more guidelines than anything.