It’s a knitalong! We even have a button to take in the sidebar! Please copy the image to your own server, instead of stealing bandwidth from mine!

If you’d like to participate, please notify me by leaving a comment to this post. I am not a whiz at the sidebar yet, so it may take me awhile to do you knitalong justice, having your names listed and linked there. I am designating Fridays as the update day for this knitalong. If you have pictures you’d like me to post for you, or if you are a blogger and I can link to you, I will be doing so on Fridays. Feel free to email me at any time if you have questions or problems with the pattern, or to notify me of your progress for inclusion in the Friday posts.

I am going to be knitting another one along with you. The pattern follows. I am happy to freely share this pattern, however, if you take and use it for lucrative, commercial purposes without first discussing it with me, I will be excessively annoyed, so please don’t do it.

Here are some links to pictures that might be helpful. Loads of swatches for color ideas, and a super close-up for stitch reference.

Yarn- Plymouth Encore, worsted weight. 3 or 5 colors. (Wool/Acrylic blend)
Needles- size 8, 16 inch circular, and double points
Gauge-18 stitches to 4 inches/ 10 centimeters in pattern

Gauge swatch-

co 19 stitches

Knit 1st and 2nd row.
Row 3- K1, (slip 1 stitch as if to purl, K1) to end.
Row 4- K1, (bring yarn forward, slip 1 stitch as if to purl, return yarn to back of work, K1) to end.
Knit 5th and 6th row.
Row 7- K2, (slip 1 stitch as if to purl, K1) 8 times, K1.
Row 8- K2, (bring yarn forward, slip 1 stitch as if to purl, return yarn to back of work, K1) 8 times, K1.

Repeat these 8 rows as often as you’d like, changing colors every 2 rows, not including the cast on row, so your first color change will be starting row 3. Remember that your swatch is 19 stitches, and you’re trying to get gauge of 4 inches at 18 stitches. Don’t kill yourself over gauge. If you’re close, you’re fine. Everyone’s head is shaped differently anyway.

Finally, a note about color- I have knit this hat with five colors, and with three colors. It is nice either way. The pattern is not specific on which color to switch to. Basically, pick your colors, choose the order you want them to appear, and keep them in that order, switching colors every two rows. So you will either be knitting (2 rows A, 2 rows B, 2 rows C) repeat, or you will be knitting (2 rows A, 2 rows B, 2 rows C, 2 rows D, 2 rows E) repeat. Remember that your cast on row doesn’t count as a color row. Also note that as a color repeats, it will look different, alternately. Once it will be the slipped stitch, next, it will be the knit and then purled stitch. If this confuses you, just ignore me. You’ll see what I mean.

Hat Pattern-

Cast on 98 stitches. Place a marker and join into a round, being careful not to twist.

*Knit 1 round. Purl 1 round.

CHANGE COLORS
Next row- (K1, Slip 1 as if to purl) all the way around.
Next row- (P1, yarn in back, slip 1 as if to purl, yarn forward) all the way around.

CHANGE COLORS
Knit 1 round. Purl 1 round.

CHANGE COLORS
Next row- (slip 1 as if to purl, K1) all the way around
Next row- (slip 1 as if to purl, yarn forward, p1, yarn in back) all the way around

CHANGE COLORS* repeat these 8 rows until your hat measures 4 to 4 1/4 inches tall (taller if you wish), ending with a Knit round.

Cap decrease begins-

Next round- P2 tog, P8, P2 tog, (P10, P2 tog) 7 times, P2 tog.
Work three rounds even in pattern. Ending once again with a Knit round.
Next round- (P9, P2 tog) all the way around.
Work three rounds even in pattern.
Next round- ( P8, P2 tog) all the way around.
Work three rounds even in pattern.
Continue decreasing in this manner, resulting in 1 less stitch between your P2 tog each decrease round, until you have 40 stitches remaining.

Next round- (Slip 1 as if to purl, K1, Slip 1 as if to purl, K2 tog) all the way around.
Work two rounds even in pattern.
Next round- (P2, P2 tog) all the way around.
Next round- (K2 tog, Slip 1 as if to purl) all the way around.
Work two rounds even in pattern.
Next round- (P2 tog) all the way around.

Cut yarn, leaving a long tail. With a blunt-tipped embroidery needle, run tail through remaining live stitches, pull tight, and weave in ends.

Pattern updated 11-03-04 thanks to Kim for the correction. Also, she had some additional questions that I answered in the comments which might be helpful to you.
Pattern updated 11-09-04– a clarification on the initial decrease rounds, no change to the pattern itself.