Wood is a strong and versatile building material, but to make the most of it you need to combine its strength with proper design and construction. The purpose of wood bracing is to create structures that are not prone to movement and distortion. In square structures, the easiest way to do this is to create triangular portions within the squares that can't elongate in the same way a square can.
Place a one-inch-thick by four-inch-wide piece of wood onto the corner of a wall with the board's ends overlaying the stud and the beam of the wall about two feet away from the corner on each member.
Trace the sides of the board onto the face of the stud and the beam using a pencil.
Cut a one-inch-deep cut on each of the pencil marks using a circular saw with its blade set to a one inch depth.
Make several more cuts in between the two cut pencil marks to make removal of the wood easier.
Remove the wood between the two cuts to a depth of one inch using a chisel.
Set the one inch piece of wood into the cuts that you made. Nail it into place. Trim the ends of the piece of wood off flush with the outside edge of the stud and the beam using a circular saw.
Repeat this process on the remaining three corners of the wall.