Determine what style and tone the story will be written in. The style and tone of the short story should be reflected in the diction you choose. Therefore, a story that is breezy and humorous or one that is somber and self-reflective should be mirrored by the diction.
Choose a point of view. This will determine the diction it will be written in. For instance, a first-person point-of-view story might have a completely different form of diction than a third-person limited.
Determine who will be the story’s narrator. What type of character will she be? For instance, in a first-person point-of-view narrator, the character might be a con artist. Therefore, this character’s vocabulary might be less formal and colloquial. If the character is the professor of an ivy league college, her vocabulary might be a bit more formal and elevated. If the story is being told in third-person limited, then the narrator’s voice (not necessarily the character’s voice) should mirror the tone and mood you wish to convey in the story.
Choose the type of story you will be writing. What genre will the story be? For instance, if the story is a thriller, then the diction might involve simple, direct sentence structures, particularly in any action sequences. If the story is literary fiction, then more complex sentence structures might be used. Again, this all depends on the style and tone you wish to convey. A thriller could very well be written with complex sentence structures and literary fiction with simple, direct syntax. Be mindful of the effect tone and style will have on the genre in which you are writing.