Point out letters and their sounds. Make a game out of it, asking the children to identify the sound of the letter you point to or to name the letter whose sound you make. Have children trace large letters with their fingers and say the letter sound as they trace. Help children learn to string letters together by reinforcing their individual sounds and then having the children say them in combination.
Use rhyming stories, poems and songs to help children recognize the different sounds in words. While they may not yet be able to identify the similar letters in longer words, as they begin to recognize and combine letter sounds they will quickly learn to recognize them in two and three letter words. Being able to distinguish the similarities and differences of sounds in these rhyming words is essential to learning to read.
Children's brains are predisposed to learning through repetition. It builds neural pathways that let children learn new behaviors, patterns and, especially, language. Reinforce letter sounds regularly and have children practice combining them. Set a designated time each day to practice basic reading techniques using letter sounds, letter and word recognition, and rhyming. Repeat the same processes consistently so students know what to expect when reading time comes.
Patience is essential when teaching young children to read. Children in this age group are often easily distracted and lack impulse control skills. Their attention spans are short and they are not able to focus on the same information for extended periods of time. Learn to recognize when you are losing students' attention and be willing to change the stimulus based on the children's signals -- not the schedule.