To find out the amount of stitches you will need for a child or for yourself, you will simply take the circumference of the head and minus about 4 cm. You should try to keep the numbers even as this will help when you need to start decreasing. On the side of the yarn you are using there will usually be a tension chart, take note of this, mine has 22 sts by 10 cm, you will use this to calculate the stitches required. You will now times the head measurement by the the stitches stated on the tension chart on your yarn, then divide by the centimeter. For example...
Circumference about 43cm I rounded it down to 40
(40*22)/10 = 88
So you will cast-on 88 sts.
The reason you round down the number is because the hat should stretch and fit snugly on your head. If you used the exact circumference of your head to make the hat, it will be loose and fall off.
How-To Video http://youtu.be/GEJscUCnlCc
What you need
2 DK (Light Worsted Weight) Yarn 50g (referred as Yarn A and Yarn B)
5 3.25mm dp needles
5 4mm dp needles
Width when stretched 20cm
Cast on 88sts using the longtail cast-on method, on to 4 dp needles (22sts on each needle)
Rib for 8 rows K2, P2
Rows 1 -2 Knit around (Grey)
Next 5 Rows Change colour (White) but do not cut off yarn A, just let it hang at the back of work. knit 5 rows in yarn B. It will look like you've just knitted 4 rows in yarn B but when you add yarn A back in to the hat, the fifth row will appear. Like so...
Next 5 rows Knit around in yarn A (Grey) and leave yarn B at the back of work. Do not cut off
Your work should measure about 7cm. If you want the hat to be longer then continue knitting around until you have your desired length before decrease.
Switch to yarn B (White)
Row 1 K9, K2tog all around (80)
Row 2 Knit all
Row 3 K8, K2tog all around (72)
Row 4 Knit all
Row 5 K7, K2tog all around Change color (Grey)
Row 6 Knit all (64)
Row 7 K6, K2tog all around (56)
Row 8 Knit all
Row 9 K5, K2tog all around (48)
Row 10 Knit all
Row 11 Change colour (White) K4, K2tog all around (40)
Row 12 Knit all
Row 13 K3, K2tog all around (32)
Row 14 Knit all
Row 15 Change colour (Grey) and cut yarn B K2, K2tog all around (24)
Row 16 Knit all
Row 17 K1, K2tog all around (16)
Row 18 K2tog all around (8)
Row 19 K2tog all around (4)
Cut yarn and attach the end to a sewing needle. Weave the needle through the last 4 sts and pull tight. Push the needle through the top middle of the hat to hide the end. Weave in the rest of the stray yarn tails.