To sign happy, take your open hand (or both hands) and brush up your chest a couple of times. The sign for happy is very similar to the sign for excited, but the difference is that with excited, your hands take turns touching either side of your chest and only the middle fingers brush against your chest. With happy, both open hands tend to touch the chest at the same time.
However, to simplify things for your baby, you can start out by choosing just one of those two signs, and use it for both emotions.
Teach your baby the sign for happy by making the sign whenever your baby is visibly happy or excited. Remember, when making the sign for happy, it is important to emote happiness.
Remember, emotional signs like happy have to be presented with emotion. So when you do the happy sign, make sure that you project happiness.