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Once the **varnish has dried and cured for a few days (depending on the varnish you use),  you can rub out the finish.  Start with a light sanding with 400 grit paper - don't over do this and be carefully on edges and corners.  You are trying to knock off any burrs and bumps in the varnish only.  If you sand too heavily you will sand
The Hand Rubbed Satin Finish -part 3
(for interior architectural wood finishing)
**Note: Use oil based varnish over shellac. Do not use poly-urethane or water based acrylics because they will not adhere to shellac. If in doubt Zinsser makes a wax - less shellac called "Seal Coat" use this instead of regular shellac.
click here for Seal Coat data
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through the varnish down to the shellac leaving an "edge" where the two join.  If this happens you will need to re-coat the varnish.  Keep it light.  After this very light sanding, using 0000 steel wool, rub down the surface one final time this will smooth and dull the varnish down to a pleasing soft satin sheen while removing (or hiding) any scratches from the 400 grit sanding. 

Waxing with finishing wax

    If you want to raise the sheen back up a bit while adding a final smoothing touch,  apply a coat or two of finishing wax.  Paste finishing wax is applied with 0000 steel wool in the direction of the wood grain and after fifteen minutes or so of drying time, is buffed with a clean soft rag or a buffing wheel.  When applying two coats you will: apply, let it dry, buff  then repeat the process again.
      A wax-less finish is a bit easier to maintain in some situations.  A waxed surface can smudge (but the smudges easily wipe out with a rag), so you might not want to use wax if the surface is handled.

One final note:  This method is for production finishing of interior architectural wood.  If you are finishing a musical instrument or a fine finish table top, you will probably want to use lacquer and spray apply it.  Lacquer is similar to shellac in that each coat melts into each other - this type of finishing works well for extreme rubbing out because there are no "layers" of finish so you can rub away without worry about rubbing through a layer (or coat) of finish (you do have to be careful not to rub all the way through to the stain though).  With progressive fine rubbing compounds you can get a finer finish and can buff up  the finish to a high gloss with extreme smoothness.  This type of treatment is reserved for the very finest of finish and is not the standard used for architectural wood trim.