Well I'd like to say it was a family secret passed down through the ages but I actually learned it off a earlier Tradgang post I believe. It's pretty simple but I'll probably write it out so I can't even understand it.
Lets say the last hole at the knife point is hole #1. I use a leather punch and prepunch all my holes.I glue all surfaces and lay the welt on the back part of the sheath lining up the holes with my needle. The thread is doubled up meaning there is no short tag both ends are the same length with the needle in the middle. I go down through the second hole leaving about a inch of tags inside the sheath which will be sandwiched with glue when the front side of the sheath closes on it. Now I have a sheath closed up with my doubled up thread coming out the back side of the sheath in the second hole. Now come up through #1 hole and skip over the second hole and go down through the #3 hole leaving a little loop, don't pull it tight yet! Go back up through the second hole you just skipped on the front side and splitting the two threads and now pull tight. Continue on in this manner skipping the next hole coming back underneath and coming back up through the whole you just skipped!
See I told you I would make it sound really complicated! It's not actually, just practice on some cardboard or something first. Don't try to twist the threads before you come up through them with the string and when your pulling the loop closed remember to pull each strand tight enough separtly to make it all even. The guy who posted how actually did his sheaths with four strands and I think that would look really good on bigger knife sheaths but for my small knife sheaths I just use the double strand. For length of the thread I actually use the same length I did before with the exception of course there is two strands that length now. Hope all this rambling helps!