For the most accurate color, you'll want to use a custom white balance. Custom white balance is also the best choice when you're in a lighting situation for which there is no preset, such as a mixed lighting situation (sunlight falling into a fluorescent-lit room, for example). Auto White Balance works by identifying something in your image that's probably white, usually a bright highlight. This area is then used as the basis for the camera's white balance analysis. White balance presets don't analyze the current scene at all. Instead, they're simply preset values that Canon has determined are good for each specific lighting type.
When you use a custom white balance, you point the camera at something white and tell it to use that as the reference for its white balance calculations. Because you're in control of what the camera is using as a reference and because that reference is reflecting the actual light in your scene, you get a very accurate white balance calculation.
To perform a custom white balance, you first need something white, like a piece of paper or a white T-shirt. It's very important that the white object be in the same light as your subject. For example, if you're standing in shade and your subject is 10 feet away in bright sunlight, don't hold the white object directly in front of the lens, because the camera is actually in very different light from the subject.
Once you've positioned the object in your scene, take a picture of it. Try to fill the frame with as much of the white object as you can. At the very least, it needs to fill the circle that appears in the middle of the viewfinder.
White paper defines a Custom white balance that produces very accurate color.
Next, press the WB button on the back of the camera, and select Custom white balance. Now you need to tell the camera which image you want to use for the white balance analysis. Press the Menu button and choose Custom WB from the second shooting menu.
Using the Custom WB menu command, select the shot that contains our white object. The camera will use this as the basis for its white balance calculations.
The camera will immediately appear to go into playback mode, but note the White Balance Set icon in the upper-left corner. If the shot of your white object is not showing, navigate to it just as you would navigate within playback mode. When you've found your white object photo, press the Set button. The camera will present a dialog box that says "Use WB data from this image for Custom WB?" Select OK. You are now configured for Custom white balance.
After Custom white balance, the same shady scene has more accurate color and a nice touch of warmth.
Unfortunately, it's difficult to make any hard and fast rules about which white balance setting will work best for you. In a tricky lighting situation like shade or clouds, you'll probably want to try Auto, the appropriate preset, and Custom, just as we have here. The human eye is very sensitive to changes in flesh tone color, so it's very important to get white balance correct when shooting portraits.
TIP: Gray Is Even Better Than White
While a custom white balance works fine with a white object, it works even better with a gray object. However, it needs to be a spectrally neutral gray object, meaning it needs to be a true gray with no hint of other hues in it. It's best to use a white object unless you have a gray card designed specifically for white balance, like the WhiBal card from www.whibal.com. It's spectrally neutral and is gray all the way through, so if it gets scratched, you can just sand it off and still have a usable gray. What's more, it floats if you accidentally drop it in a stream. If you use custom white balance a lot, the WhiBal card is a very good investment.
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Although we usually tend to think of the digital camera as the best thing since sliced bread, there are both pros and cons with its use. Nothing is available on the market that does not have both a good and a bad side, but the key is to weigh the good against the bad in order to come up with the best of both worlds.