You have raised a very important and interesting question. Let me explain the differences between the three and help you understand what you can do to avoid plagiarism when you use each of these.
Direct quotation, as you have correctly understood, is when you use the exact words of the author. such instances should be very few in your paper. Moreover, try to avoid using long passages as direct quotes; limit it to one or two sentences. To avoid plagiarism, you should always use quotation marks when you are quoting the author verbatim. You should also use words/phrases such as "stated," "mentioned that," "in the words of," etc. to indicate that you are using the author's exact words. Additionally, you should cite the source.
An indirect quotation is when you use the text with minor grammatical changes. In such cases, you need not use quotation marks, but it is preferable to clarify that you are reporting what another author has stated. You can do this by using the words and phrases mentioned above. You should also cite the source when using an indirect quote.
Paraphrasing is when you rewrite the text completely using your own words. You need not use words such as "stated," "mentioned" etc. for paraphrased text but you should definitely cite the source since you are borrowing ideas from someone else.
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