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Create a new document 500×400 with any desired background. Select the elliptical marquee tool and draw a circle, fill the circle with a temporary color. In the layers window click on your layer whilst holding the “CTRL” key on the keyboard to load a selection, now goto “select > modify > contract”. when the box comes up enter a value of around 20-30 pixels. Now goto “select > modify > smooth” and enter a value of 20. You should now have a ring like this.
Now add these layer styles to your ring. 
You should have something like this. 
Now create a shape like this. 
All done with the elliptical marquee tool using to shapes, merge both shapes together on one layer and place behind your ring. 
Right-Click your ring layer and goto “copy layer styles” then right-click your shape you just made and goto “paste layer styles” you should have something like this. 
Using the same concept as the 1st step create another ring, only this time make it smaller to fit inside the first one we made. 
Now add these layer styles. 
You should have something like this. 
Now create another circle big enough to fill whats left inside. Add these layer styles. 
You should have something like this. 
Add your letters N, E, S and W. 
Add your lines that go around the compass, to do this we create a circle from the custom shapes menu, then select the type tool and use type on a path. Ive already written a tutorial about type text along a path check that out for more detail. 
Select the pen tool and create a shape like this. 
Fill the shape with the color white and set opacity to 25%. 
Now goto the custom shapes tool within photoshop and select a custom shape same as the image below. Stretch it out to fit the inside of the compass also set layer opacity to 50%. 
Now add your little arrows which are also shapes from the custom shapes menu, just fill each side of the shape a darker shade of the main color. 
Source: hv-designs.co.uk
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