Instructions
Go to Costolot's General Store and purchase some watercress seeds. These seeds will cost you 13 coins. Alternatively, you can buy watercress seeds from Seedos. Every time you speak with him, he will offer you seeds -- however, they will not always be watercress seeds.
Plant your watercress seeds in a muddy area of your in-game garden. These particular seeds must be planted in the mud, otherwise they will not grow.
Fertilize your seeds with three applications of green fertilizer. Within a few moments, your watercress plant will begin to grow.