I want to reduce the size of an image from 200*150 to 20*15.
But when I do that in Photoshop, the image looks blurred. Is there any way we can reduce the size without this happening? Do i have do anything with the resolution...
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Reducing the size of an image will necessarily cause the loss of some resolution. The trick lies in sharpening the resulting image enough that it looks good, but not so much that it begins to pixellate.
Fortunately, you're already using Photoshop, and it really does come close to working miracles sometimes. Here's a blog post that explains how to do exactly what you've asked for.
When you want to reduce an image go to the Image > Image Size menu. Click on Resample Image and choose Bicubic Sharper from the drop-down menu. This is the best setting for making sure that an image doesn't blur. The example photo of the flower started at 2,000 pixels across. I stepped it down to 250, and then again to 125 with almost no loss of sharpness. For enlarging an image select Bicubic Smoother.