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Help me understand how to write paragraphs

I've learned a lot of great writing advice over the years but something that still is hard for me to understand is paragraph structure. I'll be reading a book and within the same chapter there will be paragraphs that take up half a page, and then there will be paragraphs that are only two sentences long. Then it gets even more complicated when characters are talking with each other. Sometimes I see the back and forth contained within a single paragraph while other times the author will have each line of dialogue be its own paragraph and a new one is started when the other character responds.

I listen to audiobooks more than I actually sit down to read so that might be another reason why I feel I don't have a good grasp on this. How do i go about learning this and all the do's and don'ts? If there is an editor here that can help explain this I would greatly appreciate it as I'm having a hard time.
Also, I'm a firm believer in always starting a new line with every dialogue exchange.

"What's my name?" Asked the mercenary in a quiet voice.
Devlin choked a little and swallowed but said nothing.
The mercenary hit her again. "What is my name," He asked again in the same quiet, demanding voice.
"I don't think it's bob... it's three letters though for sure," croaked Devlin, and then laughed when the mercenary cursed.

Like that. It's way more readable, imho.


Myth Weaver
I am sure your English teacher taught you something like this: Topic sentence, 3 supporting sentences and closing sentence. Fiction is no different. First sentence introduces the subject of the paragraph. The stuff in it are about the subject (does not have to be 3). and something closes it.

Every paragraph should begin a new subject.

Here is a small sample from me from elsewhere on the site:

Rosemary held the knife(<--subject is Rosemary. She is the subject of the whole story. The knife is part of the subject of this paragraph). Blood dripped from its length(<--detail). The goblin that had enslaved her(<--detail), dead at her feet(<--detail). She felt nothing.(<--close)

A thick chain dragged the floor as she moved about the cave
(<--New Subject, not talking about the knife anymore, talking about the chain--though Rosemary is still the subject of the story). It took only a moment for her to gain the hammer and beat the chains away(<--detail). She looked back at her captor and shuddered(<--detail). All she had endured, all she had hoped...now a dead memory poisoning her inside(<--detail). She dressed. She left.(<--close)

(<--new subject---the outside, though rosemary is still the subject of the story), in the light of a sun she had not seen in so long, she saw only waste and dead land(<--detail). Ochre growth and loose dirt from here to the horizon(<--Detail). But then also a cloud moving along the plain(<-detail). Her eyes wide, her disbelief that it could be real. And…she ran to it. Sore feet and bruised legs beneath decrepit rags, she looked a wight upon the open steppe.(<--close)

Screaming and waving her hands, they saw her
(<--New subject, They. Though Rosemary remains the subject for the story). A man on a horse rode at her before the others(<--detail), and came to stop before her(<--detail). He looked down with surprise and pity(<--detail). "I am Drake Mercer," he said. "We’ve all been looking for you. Good God, do you still live?"(<--close)

Every time the subject changes, every time a new character is doing the action, every time something has ended and a new something has started, it gets a new paragraph.

And if you gain the form, you can apply they art, and break it when you need, cause the story is better that way.
A paragraph break is formed when there is a natural end to the previous one, or if you are writing dialogue. But I don’t think there are any hard and fast rules about how long a paragraph needs to be, as long as it fits into the narrative structure. You might need to go ‘back to school’ to understand this at a basic level. I’m sure I get it wrong all the time, but that’s what an editor does (I hope) and checks where you may have gotten it wrong.
Some good advice here already. New stuff happening or (new) character talking are the primary places to add a paragraph break.

To add to that, I'll say that when in doubt, more is usually better.

Few people will complain if your paragraphs are only two or three sentences long. But they will definitely complain if it's a whole page long. Just browse the forum (or any forum really), and compare posts and your reaction to them. A post which contains a lot of whitespace is a lot more inviting to read than a whole wall of text.

If you want to take it a step further, then variety is even better. Have a few one or two sentence paragraphs (like a bit of dialogue), mixed with several that are maybe 3-6 sentences long, and the occasional larger block.

It will read more pleasantly and it will look like you know what you're doing. It's silly, but it works. People will give you credit and have a better time reading if you do.