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If you are bereft of a compass but need to know north and south you can use a traditional clock face to approximate those directions and this wikiHow will tell you how.

[edit] Steps

Determine if you are in the northern or southern hemisphere.
In the northern hemisphere:
1. Hold the watch horizontal.
2. Point the hour hand in the direction of the sun.
3. Bisect the angle between the hour hand and the twelve o'clock mark to get the north-south line (substitute 1 o'clock mark during daylight savings time). North will be the direction further from the sun.
In the southern hemisphere:
1. Hold the watch horizontal.
2. Point twelve o'clock in the direction of the sun.
3. Bisect the angle between the hour hand and the twelve o'clock mark to get the north-south line.
4. North will be the direction closer to the sun, south the other way.

[edit] Tips

No good with digital watches!
The further away from the equator you are the more accurate your results will be, as the sun will cast a longer shadow.
If is cloudy or overcast find an open area as far from sun obstructions as possible and hold up a stick, branch, ruler, pole or other straight object. A slight shadow will be cast in all but the worst conditions.
You don't need an actual watch, you can draw a watch face on a piece of paper and the hack works just fine. It's nothing to do with the watch itself, other than knowing the time.
For best results set your watch to "true" local time, in other words without adjustments for daylight savings time.