(I've captured this tutorial in Elements 9, and it's relevant to all versions of Photoshop and Elements. Please also note that I have zero design skills, so please don't laugh at my feeble watermark!)
PART ONE: PLAN IT
As always, a bit of forethought goes a long way. Take a little time to conceive your design. This might involve surfing the web to look at other people's watermarks for inspiration; or it might just mean scribbling some ideas with pencil and paper.
PART TWO: MAKE IT
I've always found it's best to actually make your watermark on a photo. This might seem plainly logical to some of you, but I'm a bit surprised at the number of people who design their watermark on a plain white background, and don't really know how it looks on a photo until they try it out afterwards.
Also, it's a darn good idea to make the watermark bigger than you'll ever need it. Therefore, I make mine on full-res photos, even though I'm only likely to use it on a low-res one.
Pick any old photo, really. I've chosen this one of a snoozy koala:
So, I start. I type my name ...
... then try a few fonts and choose one I like:
Then I add the next layer of text, and choose another font:
I want to add a little extra embellishment, so I choose the Shape Tool ...
... and choose a custom shape from Photoshop's extensive library:
(If you've never really looked at all the shapes that come with Photoshop, do yourself a favour. There's lots of fun stuff in there.)
Then I draw the shape beneath the watermark. Now I have three layers comprising the design - two text layers and a shape layer:
If I want to move the watermark around, without the different elements separating, I select all the layers at once. I do this by first selecting the top layer, then holding down the Shift key, and selecting the bottom layer. This highlights all the layers, and I can use the Move Tool (V) to move the watermark around.
Time to modify things and "jazz it up". I select the "WATERMARK" text layer, then go to Layer>Layer Style>:
(The above menu slightly differs between Elements and Photoshop, but you'll get the idea.)
I add a bit of a stroke to the text:
And I lower its opacity a bit:
(Please note that there's little point in playing with the Layer Blend Modes when making a watermark, because they don't transfer onto the image when used.)
Now I select my name layer, and change the colour to blue:
On the shape layer, I add a Bevel layer style (I've zoomed in so you can see it a bit better):
(At this point, the design-conscious among you will be feeling nauseous at my hodge-podge of styles. I'm just throwing a few things together to give you some ideas of what can be done.)
I re-arrange the layer order a bit, and move the shape layer upwards so it's overlapping the text:
At this point, I think I'm done. But there's one more important thing to do, and I urge you not to forget this step. I have to move the watermark around to various parts of the image, and check its visibility and clarity.
When I place it over a dark area - the tree trunk - I see that the blue text gets a bit hard to read:
I have a few options. I could just not worry about it - that's the easy way :) I could dabble with different text colours. Or I could play with more layer styles.
I decide on the latter. I add a bit of soft white "outer glow" to make the text stand out from the image a tiny bit more:
Finally I'm satisfied. The last step is to delete the background layer so that the watermark is on a transparent background:
Then crop away the excess space:
File > Save As ...
... and save it as a PSD file:
Then I close it. I don't need it open any more.
PART THREE: USE IT
Now I open a new photo. This is the one I want to upload somewhere. I shrink it to web size, flatten it, sharpen it, yada yada yada ...
Then, File>Place ...
... and choose the watermark file, and it appears in the centre of the photo:
The transform handles are active, so I can resize it if I need to, and move it around to where I want it:
I press Enter to finish the transformation (I can Ctrl-T to do it again later if I need to).
I can stop there if I wish. Or, I can play with blend modes ...
... or opacity. Whatever suits my style ... or mood ... or whatever.
Then I save for web, and it's ready to go!
SOME NOTES
Now that you've learned how to make and use a watermark, learn how to build it into an action (PS only): http://www.damiensymonds.com.au/act_web.html
Some people say you have to save a PNG file to be a watermark. This is absolute nonsense. PSD is the best format - not only can it have that transparent background which is so important for a watermark, it is also completely easy to come back and edit it later (eg if I decide I want my name in red not blue).
Other people turn their watermark into a brush. This is really restrictive, and I don't recommend it. A brush can only be one colour, and it can't be batch-processed. Use this PSD/Place method instead.
GO FORTH!
I hope this helps. Have fun making your own, and don't forget to visit me here if you have any questions or problems: https://www.facebook.com/groups/195567190503489/