Your characters need to be ‘three dimensional,’ and 'well-rounded.' That means, they must be believable, and not defined by a single characteristic. Add some complexity, give them quirks. A ‘good’ character still has follies and weaknesses. A ‘bad’ character still has redeeming features. That’s what we love about our favorite protagonists and villains. Give the good character a gambling addition that he’s trying to fight. Give your bad character some great talent, maybe dark humor or super-intelligence.

Your readers want to know what makes the characters tick. We want to know their dreams, desires, pains and obstacles, their weaknesses and strengths. Tell us what they need. Tell us why they can’t have it. Tell us what quality they have that’ll allow them to succeed. Most importantly, tell us why we should care.

The character's desires should be believable. If a girl wants to be the world’s best ballerina, tell us how good she already is, why her goal is difficult, but still achievable, albeit with great difficulty. Don’t make her a klutz. Don’t give her a physical deformity that makes her dream impossible. Make her talented but poor, or in a difficult relationship, or in a remote island. But the talent and the drive to achieve her nearly-unattainable goal must exist.

Examples of protagonists with weaknesses/undesirable qualities:

We care about Harry Potter because he is relatively pure. He doesn't know he’s up against the most powerful wizard of all time. He is an orphan, he is small, his vision is poor, and no one seems to love him. He’s mediocre as a wizard. All these are unimpressive qualities, but his fame in the wizarding world leaves him unfazed and he remains humble. His goal is to survive, while the all-powerful Voldemort is out to get him. And despite all his shortcomings, we want him to succeed.

Ron Weasley is a great friend, but is the jealous kind. Dumbledore is a great wizard, but has a dark past.
Shrek has ugly habits (earwax candle, etc).
Mr. Incredible is strong, but egoistical.
Simba doesn't follow rules.

Examples of redeeming qualities in the Antagonist:

Your antagonist should have a desperate need to be bad. No one is all bad. Circumstances make them turn that way. Take the example of Scar from Lion King. He wants to be King (who wouldn't?), but the little scamp Simba is in the way. Scar is wicked and cruel, and the perfect villain, because he has no compunction to kill off a little cub. But he has style (and the accent).

Darth Vader is stronger than Luke, and was always more talented and skilled. He turned bad to save his wife’s life. We respect that power and the dedication.

Voldemort is all-powerful and almost impossible to kill. He wants to be the most powerful wizard ever, but he must kill Harry Potter first. That makes him believable.

In summary, your good characters should be more good than bad, and have a very strong positive trait (bravery, honesty, integrity, compassion). 
Your bad characters should have more bad traits than good, and have a very strong negative trait (ego, lust for power or money, anger, hatred, jealousy). A good mix and balance between good and bad makes your characters believable.

PLOT is what happens. The Protagonist wants something; she can’t get it due to conflicts or hurdles, so she must take action; protagonist wins/loses.
That’s the plot. Of course, the protagonist's desire differs from genre to genre, but the basic plot elements are the same.

Your protagonist is going about her business and something happens to make her stop doing what she has been doing, step out of the comfort zone, and take action. It can’t be something the protagonist can walk away from. It must be central to her dreams, her mission, her very way of life. Remember Shrek, who was content to live in his swamp, but had to leave on a quest? He didn’t really care about the Princess. He just wanted his swamp back. His whole adventure is the plot. Same with Nemo’s Dad.

So the plot has a beginning, a middle, and an end. The beginning is when you set up the stage for the protagonist, tell us who she is, what she does, what she wants, what’s important to her. The end of the beginning is when something happens that upsets her way of life. (Simba has to run away from Pride Rock). End of part I.

The middle is when she does things to fix the problem. This is the longest part of the novel. The problem can be the antagonist, who can be a person (the villain), or an organization (evil company), a situation (protagonist loses her job or family member dies), nature (tsunami, volcano), anything that makes her do something. Each conflict is tougher and more dangerous, threatening her wellbeing. The end of the middle is when nothing seems to be working, and the protagonist is most likely to fail, and something or someone helps her out.

The end is when everything is resolved. Protagonist faces the greatest hurdle; she must vanquish the enemy and finally, either wins after the epic battle (saves the world or gets the promotion) or loses, but gains something else in return (loses job but realizes that life is more than just that, relationships get fixed).