Start with two balls in one hand, and one in the other.
You want to make three throws and three catches, throwing each ball as the previous one reaches it's peak, as in step 3. Make sure you are alternating the starting hand each time you begin.
It will be tempting to try and keep the cascade going at this point, but you will have more success if you get the rhythm down first.
Once you can perform this 5 times in a row without a drop, you will be ready to move on to the final step.