Most digital cameras (with the exception of many compact cameras) offer the option to shoot both in Raw and Raw + JPEG formats. Whereas JPEGs, as a compressed format, get various in-camera algorithms to produce an image that the camera thinks is best, Raw files get no in-camera's adjustments. Because the data is relatively untouched, users can adjust various parameters such as white balance and exposure after the fact on the original shot.
While image editing programs like Adobe Photoshop Elements are equipped to make some adjustments to JPEG files, Raw file processing provides a much broader and more accurate method of image editing. (Whether and when it's advantageous to shoot Raw is another story.)
While most manufacturers include some sort of Raw conversion software with their cameras, Adobe Camera Raw (ACR, now in version 8.3) is an excellent choice for "developing" your Raw files. In the example below, I used Adobe Photoshop Elements 12 (PSE). Be sure your copy of Elements 12 is up to date to access the latest version of ACR, then follow the steps below for a quick, basic Raw processing workflow. You can also process JPEG files in ACR, but you get more flexibility with Raw files.
Open PSE Editor
I prefer to work in the Expert mode but Quick and Guided modes will work, too. Go to File > Open and choose a Raw file. (To open a JPEG file, go to File > Open in Camera Raw and click on a file.)
At the bottom of the screen, click the down arrow for Depth and choose 16 Bits/Channel.
On the top right, click the white and black arrows at the top of the Histogram to show shadow and highlight clipping on your image. The blue areas on the sample image show where shadows have been clipped and details lost.
Click the Basic option (the first icon) under the Histogram. Be sure Preview is checked in the main viewing screen.
The quickest way to adjust White Balance is to use the presets in the drop down menu. Then tweak the white balance using the temperature and/or tint sliders. The white balance on this image was pretty accurate as shot but I reduced a slight red tint on her face by moving the tint slider to the left.
Alternatively, choose the small eye dropper at the top of the Raw screen and click on a white area in the image. Avoid specular highlights such as a bright white spot from a flash on a shiny object.
Click Default above the Exposure sliders. Avoid Auto whenever possible; it generally overexposes images, as shown here. The red overlay indicates highlight clipping.
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