Measure from the highest part of the shoulder (or the hollow in the throat) to the bottom of the hem (dress), over the fullest part of the chest.

Chest

Measure across the widest part of the Chest and shoulder blades (back), so the measuring tape goes completely around the body.  For young girls this can be one inch below the bottom of the dress arm hole (underarm seam).

Waist

Measure around your natural waistline; making a complete circle.  Do not pull the tape tight or suck in the stomach.  Insert a finger under the tape so the dress is not too tight.  The natural waist is when you bend over to the side, where your skin folds, is your natural waist.

You can also measure your child's dress that fits her well to determine the size of your child:

1) Lay the dress down on a flat surface, measure across the chest and waist, and double the measurements to get the exact size she'll need.  
2) For the length, the best way is to hang the dress on a hanger, and measure from the outside shoulder straight down to the hem.

This is the way dress size charts are made. They give customers exact measurements, or as close as can be  with variations of up to ½ inch of the measurements.