Some people, while doing Step #1, will notice sometime during the process that they are aware that it's just a dream and are therefore a little bit ahead of the game, which is great. However, most people need some more training before they realize that what they're experiencing is what we call a dream while the dream is still going on. Besides, even you who were able to realize this at times during Step #1, you probably need to practice some more in order to be skilled at it.
Now, before we start this new step, let's draw a line beneath the last dream you wrote down and write a new title under it: "Step #2: Being Aware That I'm Dreaming." Then set everything up the same way you did when doing Step #1 and set the alarm clock at times you've figured out gives the best results. Then go to sleep.
This step is a little trickier, and this is the reason why we first need to be skilled in doing Step #1. One good thing to do every night before you fall asleep is to decide and tell yourself something to the effect that "tonight I will remember that I'm dreaming." This sometimes helps. Then, in the beginning and before you get used to having conscious dreams like this - one or all of the following steps will help you get started:
Therefore, try any or all of the above to see if they work for you. If not, the best way to get started is to have two alarm clocks. Make sure you state to yourself every evening just before you fall asleep that you are going to be an observer in the dream, and you will be aware of it. It may not work right away and needs some practice before it actually starts happening, but don't give up.
Eventually, you will find a way that works for you.
When the first alarm clock rings, turn it off, and without being concerned about whether you will go back to sleep or not and, perhaps, not being able to write your dream down, concentrate on your dream and let it continue where you left off and make sure you tell yourself that you're only dreaming, and then observe the dream. After a while, you will go back to sleep, and perhaps, you will not even remember in the morning that you had this experience, but that's okay.
If this is the only thing that seems to be working for you, just continue doing it until you break through. When you do break through, one of two events will occur:
1. You suddenly get this huge realization that you're only dreaming and you get so excited that you're actually waking up.
2. You remain calm and will be able to continue observing what is going on. If number 1 is happening, you will need to practice so that you can go into the number 2 state instead. The trick is to be able to have this going for a while. Then, tell yourself that you want to wake up, and you will wake up. Immediately write down the dream and cog, meaning that you knew you were dreaming.
Sometimes it happens that no matter how hard people try, they can't get into the state where they realize it's a dream. If so, more practice needs to be done in Step #1.
I would suggest that if this is the case, just continue with Step #1, until you have your realization of being in a dream is happening to you there, and you never need to go to Step #2. Don't worry if this takes a while - normally and eventually, you'll be able to come to the realization.
If you think this takes too long and you just want to give up, just go back to using one alarm clock and set it on the time when you usually get up, and just write down your dreams whenever they occur. If you choose to eventually do this, it will of course take longer before you reach the goal, but on the other hand, there is no time limit. Hopefully, you will not get to the point where you want to give up. For many people, this whole practice is not too hard to accomplish.