The diagram displays the front and back covers open. This is just to make the stitching clear. The pages would be sandwiched together the way you usually bind a paper bag book, with the front on top, back on bottom. I've made the ribbon two tone, with blue the color of the stitching from 1 to 4, and red for the reverse 4 to 1. Punch four holes, through all layers. Starting with 1 Front, go down to 1 Back, then go up to 2 Front. The stitching continues; down 2 Front to 2 Back, up to 3 Front, down 3 Front to 3 Back, up to 4 Front, down 4 Front to 4 Back.

The stitching continues; 4 Back to 3 Front down through 3 Back, 3 Back to 2 Front to 2 Back, to 1 Front, down to 1 Back, now tie off as you choose.

It helps to do a practice piece first.  Any piece of paper or cardboard will do.