Lets start off with by creating a new image which is 6 inches wide by 4 inches in height and 72 dpi resolution with a transparent background.
What is neon if you can't see it at night? So the first thing to do is fill the background with black. Now we need to choose a skinny type to use for the neon. Make the text about 150 points and choose white as the color for the text.
The name of your text layer should have turned into the same name as the text itself. Lets change the name of this layer to Layer 2. Now right click on the layer and choose Duplicate Layer. It has now created a layer called Layer 2 copy. Hold down the Ctrl key and click on Layer 2 copy to set as the active layer. Now click Layer>Type>Render Layer. Click Filter>Blur>Gaussian Blur and use the setting of 2.3 and click ok. Now lets choose the color for the neon effect. Pick anything you would consider bright and neon looking. Click Foreground and choose your color and click ok.
To use this color we are going to use the Stroke function. This is why we rendered Layer 2 copy. Make sure that this layer is the active one and click Edit>Stroke with the settings of 4 and center. You should now have an image similar to Image above.
Click Layer>Effects>Outer Glow and use the settings
in above image. Use a color that closely resembles the color you used
for the Stroke.
Now we need to render Layer 2. Make Layer 2 the active layer by clicking it. Click Layer>Type>Render Text. Now drag this layer over top of the Layer 2 copy layer on the Layers Palette. Lets give it the real cool neon effect. Go to Filter>Blur>Gaussian Blur and use 1.2 as the setting. Once you have done this merge this layer with the Layer 2 copy underneath by clicking beside the layer between the eye icon, you will now see a link. Click Layer>Merge Down. You should now have a completed image similar to Image 10-5.
Tutorial Provided by http://www.digitaltropic.com