Here are the steps I follow when I setup a new testing / development Chainlink node. These instructions are a subset of the official documentation.

Use Google Cloud

Go to Google Cloud, setup an account.

Setup a default small VM

Create a new VM with all default settings. Note the IP. This will be running Debian by default with 4GB of RAM. Add your SSH key so you can login and connect to your server.

Install Docker

  1. SSH into your machine and run:

curl -sSL https://get.docker.com/ | sh
sudo usermod -aG docker $USER
exit
# log in again

Preconfigure your node

mkdir ~/.chainlink-kovan
echo "ROOT=/chainlink
LOG_LEVEL=debug
ETH_CHAIN_ID=42
CHAINLINK_TLS_PORT=0
SECURE_COOKIES=false
ALLOW_ORIGINS=*" > ~/.chainlink-kovan/.env

Setup Alchemy for Blockchain Access

  1. Visit Alchemy and set up an account. Click on "Create App".
  2. Name it "Chainlink Node" and pick Kovan as your network.
  3. Click on "View Key" and copy the WEBSOCKETS url (wss://eth-kovan.alchemyapi.io/v2/...)
  4. echo "ETHURL=wss://..." >> ~/.chainlink-kovan/.env

Setup PostgreSQL for storage

  1. Visit the Cloud SQL Home Page.
  2. "Create Instance"
  3. "PostgreSQL"
  4. Fill out the form. Generate and save a password
  5. Save yourself some money for now by choosing Single zone
  6. Create your instance
  7. Visit "Databases" and create a "chainlink" database
  8. (optional) setup a new username & password for your DB
  9. Under Connections, add an Authorized Network with the IP of your VM. eg. (10.0.0.39/32)

Give your node access to your PostgreSQL database

echo "DATABASE_URL=postgresql://postgres:<YOURPASSWORD>@YOURDATABASEIPADDRESS/chainlink" >> ~/.chainlink-kovan/.env

Start the node

cd ~/.chainlink-kovan && docker run -p 6688:6688 -v ~/.chainlink-kovan:/chainlink -it --env-file=.env smartcontract/chainlink:1.1.0 local n

Choose a secure key store password with 3 numbers and 3 symbols.
Choose an email and password which you will use to login to the GUI.

Connect and login to your node

Use an SSH tunnel to get access to your node securely
ssh -L 6688:localhost:6688 <NODE IP>

Then visit localhost:6688 on your computer.
If you are able to login, your node is running! Wohoo!
Click on the gear in the upper right, click Key Management then save your account address. You'll need this later.

Setup your Oracle Node

In order for your node to do anything, you'll have to
  1. Deploy the Operator contract

Fix the imports so you can load it on Remix: 
import "@chainlink/contracts/src/v0.7/AuthorizedReceiver.sol";
import "@chainlink/contracts/src/v0.7/LinkTokenReceiver.sol";
import "@chainlink/contracts/src/v0.7/ConfirmedOwner.sol";
import "@chainlink/contracts/src/v0.7/interfaces/LinkTokenInterface.sol";
import "@chainlink/contracts/src/v0.7/interfaces/OperatorInterface.sol";
import "@chainlink/contracts/src/v0.7/interfaces/OwnableInterface.sol";
import "@chainlink/contracts/src/v0.7/interfaces/WithdrawalInterface.sol";
import "@chainlink/contracts/src/v0.7/vendor/Address.sol";
import "@chainlink/contracts/src/v0.7/vendor/SafeMathChainlink.sol";

Deploy in Remix to Kovan with the LINK token and your wallet address for ownership: 0xa36085F69e2889c224210F603D836748e7dC0088,<wallet address>.
Save the address of your Operator contract once deployed.
setAuthorizedSenders with your node address.

Fund your node

Copy your node's blockchain address and pop it into the Faucet to give it some ETH so it can conduct business on the blockchain.

NOTES

Your job IDs will need to have the hyphens removed when actually sending something. You can change the price of your oracle