Specify the null and alternative hypotheses (H0 and H1) in terms of a population parameter θ.
Specify the type I error rate – denoted by the symbol α – you are willing to tolerate.
Specify the sample statistic ˆθ that you will use to estimate the population parameter θ in step 1 and state how it is distributed under the assumption that H0 is true.
Obtain a random sample and use it to compute the sample statistic from step 3. Call this value ˆθobs.
If ˆθobs or a more extreme outcome in either tail is very unlikely to occur under the assumption that H0 is true, then reject H0. Otherwise, do not reject H0.