This person has many post about learning through reading but you have to dig for them because they don't talk about language learning much any more
I definitely second reading. I used to use anki a ton (and paper flashcards before that with my first language learning adventure) and with German, I've switched over to just reading a bunch. With Spanish I tried reading a few books and just learning 'from context' but turns out I learned WAY more, way faster looking everything up as quickly as possible and moving on. Readlang can be a good way to do that, but I used a kindle. Worked alright, though some parts of the German language (verbs that can split and scatter across the sentence, nouns that can get lego'd together) make the kindle flat out not able to handle some kinds of questions. Readlang might not be able to handle that either though.
With Anki, I found that words would often be something I'd recognize, but just as a word that I 'should' know. Not something I'd instantly and intuitively understand. With reading, words sink in... and not just that, but they start to take their proper place in phrases and expressions. Think about it after all... there's a lot of actions even in English that have strange verb pairings. Just learning the action or the verb in isolation won't really help you.
The downside of reading a ton, is that it (obviously) won't get you very far towards active use. At this point I'm extremely comfortable reading in German, fairly comfortable listening (I can comfortably watch Daredevil dubbed, and I tried transcribing for shits and giggles... could get about 80% word for word on first pass, and at least understood almost all of it) but my speaking and writing is kind of shit. Now that I can passively understand as much as I do though, it's really easy to get into active use.
As far as vocab... don't worry about it. You'll learn specialized vocabulary in some places and have holes in others, but it'll all fill in. I love to read, and I'm about 20 books in with German, and there's still some holes but not as many as you might think. And yeah, maybe it's not useful to know midwifing related vocabulary (Mists of Avalon) or words relating to political philosophy (1984) but as long as you read the kinds of things you're interested in talking about, it'll more than balance out.
If you don't enjoy reading though, then don't read... I think the real key is to spend good time learning the language doing something you enjoy, so that you look forward to doing it every day. I personally hate using Anki and memrise and such, and I'd much rather be enjoying a story... so that's what I do, but everyone's got their preferences.
Here's my number one tip though: Don't spend too long to prepare for using the language. At some point (sooner than lately hopefully) find a way to stop preparing, and to just start living. So, if you were farther along in French, what would you be doing? I tend to be a little introverted, so most of what I switched to German is videogames, media, and books, but everyone's got different lives they like to live. Just don't spend too long studying in preparation for actually living it.
More from adventuringraw:
I'm going to offer a completely different perspective than what other people here are recommending.
Drop Anki entirely.
Anki is great in my view for two things. When you're first starting out and your vocabulary sucks, it's the least painful way to hit that minimum level needed before graded readers/easy young adult fiction become approachable. I'm begrudgingly getting up to speed in Russian with anki using recognition cards only... in part because Russian has vastly less graded reader resources available than German does.
Anki is also amazing for active use. If you're speaking/writing a fair bit as part of your studies, writing a card of some sort when you're searching for a way to express a thought is a kick ass way to expand your active vocabulary. Same as above though, I wouldn't bother with both sides of the card... here I'd only bother with an active recall card.
So... how should you study then?
Read a holy fuck ton. In my experience, it takes about 6 or 7 times encountering a new word before it solidly enters your passive vocabulary. If you have books for class you have to read, you can spend time reading other work by the same author, since most authors have very similar writing styles and word choice across books. I absolutely promise than if you were to spend 2 hours a day reading vs 2 hours a day laboriously making notes and studying anki cards, you'll end up a much stronger reader with a better vocabulary because of it. Words won't enter your active use as easily, but if you're studying literature, that's less important anyway.
One caveat. I've pretty extensively tested 3 different ways to read. One where I make an anki card for every unknown word, one where I read without looking anything up, and one where I looked up every single thing I didn't understand, but did it quickly and made no notes at all. The last method by far worked the best for me. I know some people are all about learning from context and just reading, but I ended up expanding my passive vocabulary much faster by taking those 5 seconds to do a super quick look-up before moving on.
Also, you'll find that your problem with similar words will be solved, since each word will be colored by the dozen situations you've encountered them in. Every word does have pretty subtle nuance (gemütlich and bequem for example) and trying to get at those nuances by using a different english word for each entirely misses the point, and just gives you the illusion of knowing the difference.
Obviously if writing is more important than reading for you though, ignore this... but this is by far the best way I've found to blow up your passive vocabulary. I can read whatever I want now in German with 98%+ known words, and anything easier than a college reading level I go pages without seeing anything I don't instantly know. I've read about 10,000 pages worth of books in German, for whatever that's worth.
You say you've read a lot... how much is a lot? What have you already read in German?
I tend to like esoteric horror and fantasy, and in my experience at least... it doesn't REALLY matter, it's more about reading level. Yeah you might learn some 'obscure vocabulary' as Henkkles mentioned, but... eh. I promise that's not where you'll get tripped up. Learning verbs are always the hardest for me, and you're going to run across those in every book.
If you want relatively approachable German books for your level, check out Michael Ende. Momo was good, and would make a good choice for a first book. Die Unendliche Geschichte of course is the classic fantasy, but that book was a little bit more challenging vocabulary-wise. I'd love to read the rest of his stuff too, haven't got around to it yet.
Anki is a suitable way to learn new words, but I don't use it. You'll pick it up fine just reading a fuck ton. I personally look up everything I don't know, I find I learn much faster than trying to get it 'from context'. Takes a few times encountering a new word before it starts to stick, but it always does. Just depends on how patient you are I guess.
I haven't read much by actual German authors yet... Siddhartha, Der Schwarm, and those two Michael Ende books are kind of it. (I've read another dozen and a half translated books though). I liked der Schwarm, and if you liked the Martian and things like that, maybe you'd enjoy, but I'd save it until you've read at least a dozen easier books, if not more. It would be a slow moving book even in English (it was almost 1,000 pages long) and would be kind of unreasonable if you couldn't just read it like a normal book.
I second the suggestion for graded readers too. Best way to bump up your passive vocab is just to read... a lot. Every single day. Worked for me at least. Definitely start with Momo though if you'd like something vaguely fantasy-ish that's approachable at your current level.
For whatever it's worth to you, to get an idea of time frame and all that... I just finished the German translation of the mists of Avalon (interesting book, but more depressing than I needed I think) and by the second half I was maybe looking up one word per five pages on average. Like a wierdo I keep a little log of how much I've read in German, and by the end of that books I had over 11,000 pages read. Even by 6 or 7 thousand though, reading was starting to feel very comfortable. That was around when I started finding I was going a page or two here and there without needing to look up anything at all.
Little aside though... reading is boss for passive vocabulary (listening and reading will go way up) but my speaking and writing is WAY behind. So... if it's a goal of yours to speak it, practice there too, and while reading, pay attention to noun genders. You won't pick those up well just from reading, in my experience at least.