With shading, it's god to choose a colour (black and white work quite well!) and put it at the top or bottom of where your skin or part of skin is going to get shaded/blended. as you can see i did what i call 'block shading' in this skin. block shading is when you can see it doesn't blend perfectly but gives the skin that classic 'minecraft' effect.

!Disclaimer!
I, _Whisper12_ made this skin and it is my own technique. all rights belong to me/her and if you wish to use this skin please tag/credit me as this was actually pretty hard to make (at least 2 - 4 hours).
thankyou! <3 _Whisper12_