1. First create a new document by pressing Ctrl+N. I set the dimensions 200 by 150 pixels, and the contents transparent for this tutorial, but definitely change the dimensions according to your needs. They are too small for the real world :)

2. Set the foreground color to a dark color. I chose a shade of dark blue. You can use the swatches palette (Window > Show Swatches) for quick color picking. Then press Shift+F5, and click OK to fill the workspace with the foreground color.

3. Change the foreground color to a light color. I chose a shade of yellow. Select the type tool by pressing T. Click on the workspace and type something.

4. Look at the layers palette. Right click on the T ikon displayed on the text layer, and select Render Layer from the pop-up menu to convert this layer into a normal layer. If you are using Photoshop 6.0, the palette will look slightly different; right click on the layer, and choose Rasterize from the pop-up menu to convert it.
   

   Now, Ctrl+click on the layer to select the layer transparency, and press the Delete key to erase the inside of the selection.

5. Select Edit > Stroke to stroke our type. Use these settings:
   Width: 4
   Location: Outside
   Blending: 100%
   Mode: Normal

   Feel free to change the stroke width according to the size of the type you have used.

6. Press Ctrl+D to deselect the selection, and Ctrl+E to merge this layer with the layer below it. Then select Filter > Distort > Ocean Ripple, and apply the filter with the following settings:
   Ripple Size: 1
   Ripple Magnitude: 3

7. Drag the layer to the new layer icon () found at the bottom of the Layers palette to duplicate the layer. The newly created layer's name should be Layer 1 copy. Select Layer 1, and apply Filter > Blur > Gaussian Blur with a radius of 4.0 pixels. Now select Layer 1 copy, and change the layer blending method from Normal to Dissolve, and the opacity from 100% to 25%.
   

   That's all! If you want to try another variation of this effect read below.

If you set the layer opacity to 75% you will get a chalk effect! In fact, there is another way of creating a similar effect: a tutorial written by Nick Ustinov can be found at WebDeveloper.com's Design section. This tutorial is a classic and worth a look, but unfortunately it only produces grayscale results. To best of my knowledge, it had been originally published on CoolType.com, which was later merged with WebDeveloper.com, and I still miss the original CoolType :(

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