Doing the shadow and highlight

I get the pencil and the first shadow color and start drawing. I draw thick and thin areas of shadow, lines that stop and lines that goes all the way across the head. Remember to let the lines and shapes follow the round shape of the head - curves are better than straight lines.
Because we've backed up the outline and ticked off 'keep transparency' you don't have to be careful to stay inside the outline - be as sloppy as you like :P
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Now I get out the darkest shadow and draw inside or close to the lighter shadow. Don't be afraid to let some lines enter the base color - this is not pillow shading. Use this color to further darken some shadows and add detail to other parts.
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On to the highlights. I use the first highlight color and I use it liberally. I draw inside the areas with base color. Again, try not to be inhibited but the shape of the base color, do different shapes and strands to avoid the pillow look.
With this color you can so both strands and sections at the same time, just make sure that not too much of the base color is left. At this point you can go for more section shading or strand shading. For this doll I've chosen a more strandy look, but that's really up to you. It can be an advantage to do mostly bigger sections of this color now, and leave the strandyness for the other highlight colors - play around and see what you like.
You could do a backup layer before starting to highlight if you're up for experimenting.
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The next highlight color is used to build up shine and add detail to the highlight sections.
For this doll I'm only doing strands now, but you could do both strands and smaller sections or color.
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With the last highlight color I add the final shine. I generally make shorter strokes and I try not to use this color on every single highlight. You get the best result if you only use this color on top of the no 2 highlight color. To make sure you don't draw on the other color you can use the 'select regions by color' tool. This tool is related to the magic wand, but unlike the magic wand it select ALL pixels of the same color, not just the ones you click on.
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If you hide the selection border (View -> Show selection) you won't even know it's there, but you'll only be able to draw inside the selection. Toggle selection visibility with CTRL+T. To get rid of the selection, press CTRL+SHIFT+A. It's generally a good idea to make the selection visible again before you get rid of it... otherwise you'll forget that it's invisible the next time you use a selection tool.

Ok, my final highlight shading turned out like this:
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>>> next page, Adding extras and fixing the outline >>>