Hi Misdee
I'm a reception teacher and absolutely love the whole process of teaching reading. Children need to learn many different strategies when starting to read.
Phonics: Like Cazzy babs said. Jolly phonics is a really good system and encourages lots of "sounding out" to breakdown and then build up words. (in case you've been watching the news, it is a "Synthetic Phonics System".
Sight words (sometimes called Look and Say). Children build up a sight vocabulary over time. There is a list of 45 commonly used words which is taught as a basis in Reception classes. Children learn to recognise the shape of words - "look" is often a first word because of the oo looking like a pair of eyes. "was" and "saw" are very commonly confused words because the shape is exactly the same. However, a child can only hold a certain number of words as sight vocabulary when learning to read, so they need to have other strategies as well.
First letter and picture clue: If a child recognises the first letter of a word, they can then use the picture to help them make a reasonable guess as to what it could be.
Context: If a child can read some other words in the sentence, they may be able to work out the next word by it's first letter and the context.
Rhyming: If your dd can read "cat", then she will learn that she can also read hat, bat, rat etc. because there is part of the word that is the same.
After a few sessions on a new book, it's not unusual that your dd can recite the book. Try writing a few of the individual words on flashcards, or write a whole sentence, cut the words up, and work with her to make the sentence again. It's always a good idea to include the full stop after the final word to give her a framework to start with. That way, she can always get the first word by its capital letter, and the last word by its full stop.
You could also make two sets of simple flashcards of words like cat, hat, rat, sat, mat, pat, bat etc. and play snap or pelmanism (pairs). Encourage your child to sound out each word to see if they match.
To help with sounding out, you could use magnetic letters, or foam bath letters. It's always good to get your dd to move the letters around herself to try and make new words. You could make the "at" and then give her a range of different letters to put on the front to make new words. Perhaps she could "win" a counter for each one she manages to make.
You can buy Jolly Phonics support material from most book shops. Do you know what phonics system your dd uses at school?
Hope this helps - sorry it's so long!