Here's my crafting technique:
I usually start hammering away with Strong hits until I get around "WARNING" heat level (I switch to Medium if I'm close to that level), then I use Light or Wait until heat goes down to 1 or 2 pips, then I repeat the cycle.
If I'm low on durability (30-50) and progress, I rush to full progress with Light and Medium.
If I'm almost done but have lots of durability left, I alternate a turn or two of Wait with Strong in order to maximize quality, then finish up with Light and Medium when durability is around 20.
As soon as I unlock Rumble, I use that instead of Strong at the start, then revert to my normal technique at around 50% progress (using Rumble there is kind of risky because of its huge variance).
The aim is ending up with a high quality item (80+ in the early game, 120+ later) and 10 or less durability left.
At skill level 40 you get an option that boosts the current quality by 10%, so you want to use it at around 80% progress. Keep in mind that it will increase heat and lower durability, so plan accordingly.
All the options I didn't mention are IMO not worth using.
When you go too far with Rumble or Strong/Medium, you will likely enter OVERHEAT, so use Light (risky) or Wait it out. Of course you want to get to full progress ASAP when it happens and you're getting low on durability.
And here's another tip for crafting: when you're done with Act 1, stop redeeming scrap metal at the Blacksmith and keep hoarding it. Not only the items you get from him are likely to be mediocre, but the scrap will count as crafting materials, and the more of them you have in stock, the higher the starting quality of the items you handcraft.
I hope this helps :)