Dragon Souls

How or what is the best way to get a dragon soul item?
ive tried small boss hunting, only killed lvl 3 roosters tho.
i got normal dragon souls from that, and i also want to know what monsters from the small boss hunting quest drops lvl2 and above dragon soul items?

What lvl should i be and equiptments do i need to have to do the terato dragon quest?

teratto kills all minimum of 20 times.... but +12 full -7 gears do help XD.... im not sure abt the lv 2 part but i guess its the higher monsters like silver hawk etc. Lava beast drop dragon souls but its -fire resist stuff lv 1.... teratto drop lv 2 or higher too.