When lost in the woods, the only way to make progress is by means of informed decisions. Having the ability to make an improvised compass could make the difference between finding your way out of the woods or wandering aimlessly. It’s very possible to end up lost without any of the necessary supplies to make a compass. However it’s better to have the knowledge without the resources than to have the resources and not know what to do with them.
Set the needle on the leaf. Depending on how well it's magnetized, it could take as much as two minutes before the needle indicates a direction. After it does, the tip of the needle may be pointing either north or south. The position of the sun may make it obvious which is which, but during midday, you may need to look for other clues to determine which direction is north. When there is no water available, an alternative is to suspend the needle from a string. Keep the string shielded from the wind, and take into account the fact that the string's resistance to twisting can influence the direction.