Dig a trench that is 1/10 the height of the final wall. Your retaining wall should be 4 feet or less. If you wish to have a wall higher than 4 feet, have a professional come out to help you install it.
Place the first set of stones into the trench and back-fill the soil around the first course of stone.
Tamp the soil that will be behind your wall with a tamper to make it as compact as possible. This prevents too much water from getting behind the wall.
Stack the next course of stones slightly back into the soil behind the first set. This creates a step-like look to the wall and also makes it stronger.
Continue stacking the stone, stepping back each level into the soil behind it, until the wall is at your desired height.