how to make a sprite with alpha chan

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Neochrome

Hi, im using photo shop 6 and im getting a little fed up of the alpha channel working on moment and not the next, this is because im only guessing my way

i have some clouds and i want to make them look like unreal. so i need an alpha channel (i know its not neccery BUT i need the practice) how do i do it, a step by step guide for me if you can please??