The following pictures will show, the how.
Knit a rectangular piece 4 or 5 in x 20 inches. This will be the band.
Pick up a the side stitches and hang up onto the needles of the machine.
Knit the body of the hat in any stitch. I used a tuck stitch. A tuck stitch will make the hat a bit wider and less snug for hair. Knit as deep as necessary for the body of the hat.
At the crown, move the stitches onto their neighbour needle, so that every other needles has stitches.
Change the DIAL TENSION, so that it knits tighter and knit a row or two.
Remove the stitches from the needles, by using a threaded bodkin, large eye tapestry needle or double eye tool to gather and secure the crown.
Decide which side you prefer for the finished side and sew the side seam of the hat.
Decorate as desired.
This is the finished hat, embellished.