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Drop Shadow Example
drop shadow example

Photoshop Drop Shadow
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*NOTE*
This will become much more easier and consistent with the introduction of Photoshop 7. Starting with Photoshop 7, you can expand the canvas a relative number of pixels so the exact same drop shadow can be added to a folder of images during a batch process, something previously impossible unless you stopped the action and did the math for each image.
Drop shadows look best (and I feel should only be used) on a white background or else they look unnatural. The point of a drop shadow is to give the image the look of hanging on the wall in a gallery. Remember to add a single pixel stroke (line) before adding the drop shadow. It visually completes the picture so the two sides without the drop shadow don't blend into the background.

Photoshop Drop Shadow
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Rename background layer by double clicking on it in the Layers Pallet and saying OK to the new name
Double click on layer and choose Layer Style > Drop Shadow Style. Picture #1
Create your angle, opacity, distance, spread, size of shadow Picture #2
Add canvas space to the image in the directions of the drop shadow that is slightly greater than the size of the shadow (I didn't illustrate the Canvas menu which is under Image > Canvas Size)
The drop shadow will then appear in that added canvas area Picture #3
One of the problems I encountered when setting up a batch operation to add the drop shadow to a folder of different sized images was that the size of the shadow was dependent upon the size of the original graphic. I could add a fixed sized drop shadow but I couldn't expand the canvas by a fixed amount. The canvas dialog box wouldn't recognize the + or - signs, only real numbers. The result of that was each image, if even a slightly different size, would have a different size drop shadow when created in a batch operation. Ulead PhotoImpact has a much more elegant way of adding a uniform drop shadow and can do so in a batch operation.

Screen Captures
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Picture #1
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Picture #3
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Picture #2

Sample images Anne Knoll

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