Simple answer: When you have felt your burr jump between both sides of your blade, it's time to move on to a finer grit.
It's all about the burr. When you sharpen one side of your knife, you will create a burr on the other side. The burr is tiny pieces of metal from your knife that cluster and stick to the edge of the blade as you sharpen it. The courser the grit, the bigger the burr. You may be able to see the burr with courser grit, but no matter what grit, you should be able to feel it. Run your thumb from the spine of the blade to the edge of the blade - you should feel the burr right at the edge - you should see coloration to the mineral oil left on your fingers, and if you rub them together it should feel kind of like sand, and that tells you, you are indeed shaving metal. Eventually, as you sharpen, the burr will move from one side of your blade to the other as you alternate which side you are sharpening. Be sure you have felt the burr jump between both sides before you move on to a finer grit.
It's up to you how many different grits to use - unless you're completely re-forming the edge of your blade - i.e. removing dings or refurbishing an old blade - you don't need to utilize course grit. Most blades can start with medium grit. If your blade does not form a burr at the grit you are starting with, step down to a courser grit. As you step up to finer and finer grit, the burr may become harder to see/feel, and will require more strokes on the stone than courser grits in order to form. Patience is a virtue, take your time, expect each finer grit to take longer than the last. Test your blade however you see fit - I prefer the paper test - if the blade slices through the edge of paper like butter without bending it, then my job is done. Some people like to finish their blade on leather, which will provide a razor-sharp edge. Keep in mind, angle also plays a factor here. Be sure you are sharpening your blade to the appropriate angle for your usage - thinner angles provide sharper blades, but will dull more quickly, thicker angles will not be as razor sharp, but will stand up to more usage before requiring honing.