How do I set my watch for water protection

You don't need to do anything. The Apple Watch is water resistant always.

You can turn on Water lock to prevent water pressure from activating the screen though.

click here ➜ How to use Water Lock and eject water from your Apple Watch - Apple Support

Or put slightly differently, the water lock locks or unlocks the touch controls (as water “confuses” those), and takes a few other related actions (ejecting water from the speaker cavity), but does not alter the water resistance in any way.