I read Picus' post on chip repair but I still have a few more questions. Because it is a sticky most replies will be thanks.

I recently purchased a 06 Coupe that is Diamond Graphite Metallic and it has a 1/10 of an inch chip in the paint on the fender and it has rust in it. I attached a picture with a ball point pen pointing to give reference. What is the best way to clean off the rust? If I need to sand, how should I do this so I can still use touch-up paint? It looks to me around the larger chip that the rust faded into the paint what does that mean?

I think I will need to use a primer because there was rust (that I hopefully removed). Can I spray primer into a cap and use the toothpick method to apply? Also how can I be sure that the primer does not rise up the edge of the chip and show through in the end, or do I even need to worry about that?

After I apply the touch-up paint and wet sand it smooth using 2000-3000 grit do I need to buff it smooth before I clear it? Also what kind of clear coat should I use? Just regular auto krylon clear? I am assuming after i clear I need to wet sand again right?

Please be detailed. And thank for any help.