If it is in 3rd person – a story with multiple characters, then use the quotation marks. Example:

It was a dark and stormy night. “What am I doing here?”, thought Jake. Just then…

The important thing is to pick one style, make it very clear to the reader how it works (particularly the first few times you use it in a story or novel), and stick to that style throughout.

Of course, if you’re asking in the context of an academic assignment, then it would be wise to adopt whichever practice your professor or teacher prefers. Don’t ask us. You’ll just get a bunch of different opinions and preferences. Ask your professor!

“I don’t want him to see how scared I am of the gun”, James thought. I know. I’ll shout “jump him now” to an imaginary person behind him, and when he turns, I’ll grab his gun.

I put thought in the same form as dialogue, but without the quotes.

“Good morning,” she said. Yes, it’s a lovely morning, you old witch, she thought.

Like that. Only usually what’s being said and thought are better, I hope.