Creat a flame sword

Step 1: Create a new document and place your photo in the center of the document, you can download the image I used here

Step 2: The main color of this image is blue but I don't like it ^_^, so I change the color by going to Image > Adjustments > Levels in the Channel drop-down box choose Blue and adjust its parameters as shown:

Step 3: Brighter the photo a bit by going to Image > Curves

And we get

Step 4: Press Ctrl-J to duplicate this layer, blur it a little by going to Filter > Blur > Gaussian Blur and set the Radius to 5 pixels

Step 5: We will turn this layer into the glowing light around the sword. Go to Filter > Stylize > Glowing Edges and use these settings:

The edges' sword are now very glowing

Step 6: Change the blending mode of this layer to Screen, our photo now looks like this

Step 7: If you want to make the lighting effect more impressive then go to Filter > Distort > Ocean Ripple, set its parameters as shown:

Remember if you don't set your duplicated layer to Screen, you can't see the effect

Step 8: Change the color of the light by going to Image > Adjustments > Hue/Saturation. Use these settings to turn your light into red

Here is the image after this step:

Step 9: Grab a small, soft brush (the brush with low hardness) and clear the light on the handle of the sword

Step 10: Next, we will add some flames on the sword with this image

Paste this image on a new layer and change its blending mode to Screen, the black areas are totally wiped out

Step 11: Use the Transform tool (Edit > Transform) and the Move tool to make the flames burn around the sword

You can continue adding some effects like Lens Flare, Wind, Zigzag... on the image,