PhotoShop has built-in filters such as Ripple and Ocean Ripple, but to recreate a realistic water reflection effect, we need to work a little harder. This tutorial will show how we can customize a water reflection to our image.

You can download the .PSD here.

We are going to add a water reflection to this landscape, making it into a lake.

To do this, we are going to use the Displace filter, so we first need to create our Displacement Map. Open up a new document in PhotoShop. We will work with a large scale - 500px wide by 1000px high. Then goto Filter > Noise > Add Noise and choose the most amount possible, with Gaussian and Monochromatic options. Now goto Filter > Blur > Gaussian Blur and choose between 2 and 3. We will have something like this:

Now we want to goto the Channels palette and choose the Red Channel, then goto Filter > Stylize > Emboss. We want 180º, 1px, and 470%. Then choose the Green Channel, and do the same except at 90° instead of 180.
Now go back to the Layers palette and unlock the Background layer if it is locked. Then goto Edit > Transform > Perspective. We will want to modify it like so:

Click to enlarge.

We will want to do this again, so press Ctrl+A and then Ctrl+Shift+T. And then press Ctrl+D, then Ctrl+A then goto Image > Crop. Now goto Image > Image Size and make it 500x500. We will end up with this:

Now we want to go back to the Channels palette and choose Red. Press Q to go into Quick Mask Mode (or click the little icon at the bottom of the toolbox), then draw a White to Black gradient (top to bottom). It should fade to red like so:

When we press Q again, we should have the gradient selected:

With this still selected, goto Edit > Fill, and choose 50% Gray.

Similarly, select the Green Channel and create a White to Black gradient in Quick Mask Mode like so:

And again, fill with 50% Gray. Then the displacement map should look like this:

We'll save it as displacement.PSD
Now let's move back to our original image in PhotoShop. We will select the top half of the image (at the horizon) and copy it into a new layer (make sure you have enough room at the bottom to create the reflection):

Once we paste into a new layer, we will goto Edit > Transform > Flip Vertical and move to the bottom:

Now we will add a new layer and move it below our reflection layer we just created. This new layer will be the color of the water. Fill it with a blue of your choice, then add a mask to the reflection layer (that we copied and flipped). We want to create a White to Black gradient on the mask like so:

Our reflection will then be semi-transparent:

Next up, we will select the reflection layer (not the mask), and then Ctrl-click the mask thumbnail to make a selection of the gradient. Then click the Lock Transparent Pixels button () and then do Filter > Blur > Motion Blur. Choose 90° angle, and a distance of around 10-15. Once applied, press Ctrl+F to apply again. Then deselect the Lock Transparent Pixels button. We should now have something like this:

Next thing we need to do is to apply the displacement map we created earlier. First, select the reflection layer and goto Edit > Transform > Scale. Scale its width to around 800%, and leave its height. Then Ctrl-click the reflection layer and goto Filter > Distort > Displace. Choose 5 for Horizontal, 10 for Vertical, Stretch to Fit, and Repeat Edge Pixels. Once you've done this, you should be asked for the displacement map. Point to the .PSD we created earlier and then scale the reflection layer back to normal and you should have the following:

You may find you want to tweak the color of the water once you've applied the displacement map, and the horizon may need blurring a touch (you can use the blur tool).

You may also want to experiment with different values in this tutorial, or different colors, images, etc. The key to PhotoShop is definitely experimentation.
Download the .PSD here

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