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Direct Speech is from the speaker's standpoint, whereas indirect speech is from the listener's standpoint.
Direct dialogue is written between quotation marks, which indicate someone is speaking.
Indirect dialogue is used when a narrator paraphrases what a speaker said, rather than directly quoting them. Quotation marks are therefore not needed. It is not essential to start a new paragraph for indirect dialogue though you may sometimes find it appropriate.
Direct internal dialogue
Internal dialogue is used by authors to indicate what a character is thinking. Direct internal dialogue refers to a character thinking the exact thoughts, as written. You can use quotation marks or italics for this. However, it’s important to be consistent. You will often find it appropriate to start a new paragraph for direct internal dialogue, for clarity.
If using quotation marks for direct internal dialogue, you can distinguish this from direct (external) dialogue by using the alternative set of quotation marks.
Indirect internal dialogue
Indirect internal dialogue refers to a character’s thoughts expressed in third person. It is not set off with either italics or quotation marks. It is not essential to start a new paragraph for indirect internal dialogue though you may sometimes find this appropriate, for clarity.
Free indirect discourse
Italics or quotation marks are not needed to indicate dips into Free Indirect Discourse (third person narration containing the essence of first-person voice). It is not necessary to start a new paragraph for Free Indirect Discourse though you may sometimes find this appropriate.