Choose 3 colors you want to work with. One as your base color, one for the highlights and one for the shadows. Try to choose colors from the same color range (eg greens) or at least related colors. That makes it easier to blend them later on.
Roughly draw the dress/fabric that you want - don‘t forget the folds. (I like to look up pictures of nice dresses or how to make folds right. Just use google or deviantart. For example type in ‚folds‘ and ‚clothing‘ in the search bar and you get some nice examples.) Then retrace your drawing with the drag and drop items - just the outlines not the folds - and fill everything with your base color. Use the squares for the edges to get them nice and clean. Try not to go over the black outline. (Pro tip: If you already decided where your light comes from, use your highlight color to fill in the part which is nearest to the light source. Use the darker color to fill in the part which is farthest to the light. This saves time. But you also can do that later - see step II)
Next you roughly want to create your folds. Therefor you have to decide from where the light comes from. In this case from the left. So basically you use your highlight color mostly on the left side and your darker color on the right.
Start with the very left side of your fabric and give it a lighter color. (If you haven't already done it - pro tip.) Again use the squares. Now decide on how wide that part should be. Normally I don't make it as wide as the squares I used. So next use the squares in your base color and overlay the lighter squares to narrow them.
Basically you can repeat that step for all the folds. Use the squares in your highlight color to create a clean line - follow your drawing you made earlier. Again decide how wide it should be. While doing this I normally delete the line drawing so that I can see exactly what I'm doing. Also I now know were the folds are and don't need the drawing anymore. When I'm not sure about them I just improvise or do a new quick line drawing. Do the exact same thing for the folds which lie in the shadow but use the darker color.
Now comes the hardest and most time consuming part: smoothing it all out.Like I showed you in the Basic part use the prickly-round d'n'd thingies in different transparancies. Use the highlight color to smoothen out the egdes of the sharp line of the highlight color (hello logic!). Do the same thing for the darker parts. Sometimes you want them really smooth but it could also look nice if you can actually see the sharp line. It depends on the fold itself and whether it is a smooth fold or not. Argh, it's hard to describe (have a look here and you get what I mean: http://3.bp.blogspot.com/-VsfCIYA-39E/UZH3xd-RDMI/AAAAAAAAFgo/qz8Dg9dsYHs/s1600/silk%2Bfabric.jpg). So my suggestion is to have a picture of a dress/fabric where you can kind of copy from in terms of shading.
When you have smoothen it all out you may have the feeling that it still needs a bit more shading. So you can add more highlights or use a even darker color to deepen the shadows. If you do so, carefully start building up the color using the highest transparency. You can also add a little highlight to the darker parts using the highlight color. Again carefully build up the color and make sure to really blend it all out.
I hope I explained it well and you all understand each step. If not leave a comment and ask your question! You will find my answer in this gallery description.
One last thing: If you use this tutorial it would be nice if you show your result by posting a link to your doll in the comments. Also it would be nice if you mention this tutorial in the description box of your doll - but this is not a must (of course it is! ;) )