Which white balance mode should I be using?
One has to consider how the white balance mode will affect photographs.
White balance can be used in various ways in order to restore the colors when taking photographs underwater. You can either use auto white balance for minimal color alteration, "cloudy" white balance for restoring a bit of the red absorbed by water or manual white balance in order to reset the colors of your image according to the color of blue water. The latter results with the most significant effect.
There are some scenes that can be well captured using the auto white balance function without making use of a manual setting. These are typically compositions in which a black or white object can be clearly distinguished—where contrast is clearly defined. A white object, for example, might be the sun as seen from beneath the water or the white swimsuit of another diver that is very close to you. A black object might be the bottom of a boat floating on the surface or a shadow cast by a palm tree on white sand when the sun goes behind a cloud. Using manual white balance in these compositions might result in over-correction of the colors, an therefore it is preferable to use the auto white balance mode.
Other scenes, such as wide angle blue water compositions or macro shots of colorful fish, might require "cloudy" white balance or even manual white balance, in order to compensate for the loss of red water in your images. Please refer to the camera manual in order to learn how to activate these different white balance modes.
It is important to take into consideration that when using a red filter or an external flash, white balance should be used in a moderate fashion, or else this will result with over-compensation for the loss of red color, thereby providing you with red images. Note that your foreground colors are determined primarily by the effective use of a strobe. Background objects, such as water and fish positioned further away from the camera, are captured with a proper shutter speed and aperture settings, which you have the ability to manually control on most cameras. Using a manual white balance setting should be carefully monitored in such situations, in order to ensure that the combination of manual white balance with a strobe or red filter does not result with red images.
Whether you're making use of a white balance setting, red filter, strobe or any combination of these three, make sure to minimize the distance between the camera and your subject, in order to allow for colorful images.