If the string is too taught it won't sleep, too loose and it won't return. Loops and Planet Hops are tricks that you want a tight string. Sleeper and Around the World are tricks that you want a loose string to perform. Only certain yo-yos can be lubricated with oil. The Yomega Fireball and the Yomega Saberwing Fireball are yo-yos that you can lubricate with such oils as 3 in 1 oil, houshold oil, or sewing machine oil.
Graphite works good, too.
Wax works best for fixed axles. Not candle wax, but paraffin wax, and it's cheap. Paraffin wax is used in canning and bottling. It can improve the life of your axle and your string. You can put some 3 in 1 oil on your ball bearing and roller bearing transaxles, too.