Begin by using the available spools of thread (red, purple, orange, and grey) to fill in the corresponding color blocks in the pattern at the top. When a spool is depleted, generate a new one by matching the colored dots in the puzzle grid at the bottom of the screen. Continue to create new spools of various colors (light blue, yellow, green, etc.) as needed by solving the bottom puzzle. Use the newly generated spools to fill in the remaining sections of the knitted pattern. For sections that require passing through a numbered pin, you must use the matching color thread and pass it through the pin the specified number of times. Repeat the process of using thread, generating new spools, and routing them correctly through pins until the entire pattern is complete.
Each spool contains a limited amount of thread, so use it wisely. You cannot complete the level if you run out of thread and cannot generate more of the required color.
Plan ahead by observing which colors are needed to clear the numbered pins to open up the board. Prioritize generating the colors you need most to complete the pattern efficiently. When solving the bottom puzzle to create new spools, try to make larger matches to be more effective.