you will need a multi meter, search the site or buy a bently for an early e36 318 and it will have everything you need step by step. anyways, a compression test can be done by buying a compression tester from your local auto store. anyways firstly i duno why this didn't come to mind, but get a friend to sit in the car, and take off a wire at a time, with a spark plug on it, and (using a towel or a rubber glove to hold the wire) move the plug to something that will ground it like the valve cover. This will tell you if your getting any spark, or how much spark your getting.
let me know what happens after this.