This is unorganized, but its kinda what is behind what I think about while DD/WDing. I can elaborate more later, but I'd rather just give the basics and let you interpret it for yourself. Most of that smoothness between WDing and dashing just comes from dashing in the same direction of the wavedash asap at the end of the wavedash, before doing any other movement. So if I wanted to WD away from the opponent and move back towards him, I'll WD away, slight dash away, then dash forward instead of trying to WD away and dash forward immediately.
1) Understanding the effect of momentum from walking and wding.
The effect of momentum will generally only affect the first dash that is made against the direction of the carried momentum. This is what allows us to moonwalk out of walk and wd with characters that don't have true moonwalks.
2) Understanding the purpose of a WD for movement (change of position) vs as a lunge (wd into opponent, utilt/shine/whatever, or wd specifically to escape).
The point of a wavedash for movement is to shift your BASE of movement, the launching point of your dash, the beginning location.
3) Understanding standard DD.
The middlepoint of a standard dash dance is the half way point of each individual dash length. The pivot locations can be any point along the dash, but are determined by the dd ability of the opponent (how tightly they can dd).
4) Proper definitions.
Dashing is not the act of moving left or right. Dashing is the act of moving towards or away.
5) Understanding varying levels of threat based on distance, movement intent.
An opponent who is very close, but uses chaotic movement patterns cannot be predicted, but can also likely not give meaning to his movements, as the chaos only veils when he will act, giving you a reasonable amount of time to act and not be reacted to other than with a simple action, such as sh ac bair vs an aggressive forward motion.
An opponent who uses long movements draws the mind towards making assumptions/calculations about his next move. An opponent who is good at this action will draw the mind toward assuming he is moving away, then suddenly strike in that moment of weakness. This is the point of doing that long combo of dash/wavedash away then full dash straight at the opponent into the attack. Repeated away motions to pull the attention away and create an opening, then moving in suddenly.
An opponent who is very close, but makes pushes into the opponent without committing is trying to force a defensive action. The defending player will try to stop hit the opponent at the reasonable launching point of the opponent's attack, defend his position by using a high priority move, or create more distance somewhere between the moments just before the attack is launched and when the attack is moving into his space.
This last topic has a lot more scenarios, but I don't want to get too into it.