A loose headset is one of the easiest repairs that can be done to a bicycle. The only thing easier is messing it up.
The first step to tightening your headset is loosening the stem. This is done usually with either a 4mm or 5mm allen key. Loosen off the stem bolts until the handlebars will move relative to the front wheel.
The second step is the beginning of determining why the headset is loose. The tightening process may be as simple as tightening a bolt, but it could also be a little more complicated. What you will need to do is take a 5mm allen key and remove the top cap of the headset. This is the vertically positioned bolt on top of the stem.
Once this bolt is removed there should be a minimum of 2mm and a maximum of 5mm between the top of the stem and the steertube. The stem should extend higher than the steertube of which it attaches to. If the steertube extends beyond the top of the stem you will need to install an additional spacer above or below the stem.
Correct Headset Spacing
Incorrect Headset Spacing
Once the spacing has been corrected or confirmed, you may start tightening the headset. The next step is to tighten the topcap to the desired tension. Tightening the topcap is preloading the headset bearings and needs to be completed while the stem is loose. As you tighten this top bolt, you will find that the steering will eventually tighten up and bind. There is a happy medium between a knocking in the front end and this binding stage that needs to be achieved. If there is play in the headset moving back and forth, continue to tighten. If the steering is too-tight and does not turn smoothly, loosen off the top cap and re-tighten the stem..
The last step of tightening a headset is to tighten the stem. Before doing so you must align the cockpit with the front wheels. The easiest way to do this is to straddle the bike and line up the stem with the front wheel. When this is aligned you can move on to tighten the stem bolts. Be sure to notice the torque rating for the stem as over-tightening could cause damage.
Voila, you just fixed it!
Dustan