I definitely agree, Moon.
When I played Wolfy in friendlies at TAG, one of my first thoughts was "uh, what is he doing?" It sounds kind of funny at first, but in a finer sense it can be translated to "what does he want to do?" (what is his plan). From what I saw, that's what needs to be worked on. I'll explain. First of all, I'm not really sure what was going on
here (was it indecision within the match, or was he actually paying attention to something outside of the game atm? seriously, I want to know, lol), but it exaggerates what can actually be seen elsewhere, which is movement without a goal. Basically, Wolfy, I summarize what you need to work on as, 1) some character knowledge (so you gain an idea of what you want to do to the opponent; i.e. learn what works), 2) observation, and 3) spacing. That's the order of importance (and of learning) you should give these and in what will make the most change in your game, but I'm going to address these backwards (for a reason).
First of all, to clear up common misconception: good spacing isn't just, "Oh, I hit the opponent with this part of my hitbox." It more has to do with your character being a certain distance from the opponent's. This "certain distance" is the ideal distance where you are far enough from them that they can't hit you, but you're close enough that you can move in and hit them once they miss an attack or make some other mistake. This needs to take into account their movement/attack abilities along with your reaction time. In other words, it's important to make the distinction between "if he swings with move A right now he'll miss" and, "if he dashes/jumps forward right now (and swings) I'll be able to respond to it in time."
This brings us to point 2, observation. If you look back at
the start of the above match, I made two mistakes right away: rolling on the platform on accident when I tried to waveland off (and dodging), and totally missing a grab. I could have been punished hard from both things, but you weren't around. (This partly has to do with that spacing idea; you need to be close enough to capitalize before the opportunity is gone. This is more pertinent with lower lag moves like tilts.) Obviously it's important to watch your opponent. So the question of watching is, what for, and how do you do that mid-match when everything is happening so fast? The key to the second part is right there in the question: "what for?" If you can "prep" your mind to keep a look-out for specific things, it will allow you to react much faster to the occasion because you'll already have a solution in mind. On a more general scale this could simply be watching for your opponent to be in lag (or have poor stage position, though that is a little more advanced).
So what are some of these "specific things" you're looking for? Well, to know that I think it would be a good idea to start considering character specifics, including match-up specifics. Now I'm not saying you need to learn everything about this right off the bat, just some stuff, to get started. It's important for both observation and punishment. In short, if you know what tactics or combos that your opponent's character can do to your character work well, then you can expect (depending on your assumption of how good the opponent is) they'll want to do those things to you. By having a response in mind for some of them before the match starts, and watching for them, you'll be able to react accordingly instantly without having to process it mid-match. This doesn't have to be one specific move, but can work with more general things, like watching for 'jump >aerial', and responding with 'jump out of way before he gets to me and come back down with an aerial of my own now that he's just missed.' Or for example, knowing you can be chain-grabbed at a certain percent, and you're at that percent, it would be a good idea to watch for them to grab and be already thinking about dodging. Now as for the "punishment" part of watching your opponent, i.e. the part where you do tactics or combos
to them. Learn what your character can do to the opponent's character; get down what works at what percents. This lets you execute them at a moment's notice, and allows you to better understand their options and therefore what can happen next (which prepares you so you can react quicker). This also maximizes what you get out of their mistakes. If you can do more to them when they mess up than they can do to you when you mess up, you have the upper hand. Likewise, obviously comboing them minimizes the time spent during the part of the game where they can damage you (the part where you're both trying to figure out how to approach/hit the other).
So, movement is a means for two things: to be unpredictable and safe, and to get into an advantageous position (usually you're trying to do these simultaneously). You could look at this as spacing + observation. So then knowledge (punishment) takes over in the moment you strike.
All of this will take practice to get down, but the knowledge part is probably the easiest to build up because it's mostly learning the timing for things, ranges, what works at given percents, etc. Then you can shift your focus more to the observation part. And then working on the spacing aspect will naturally follow.
Boy, that was a lot more than I expected to write! O_o I feel like I should make this into a thread now, lol.