You need procion reactive dyes. Rit (the stuff from the supermarket, all they ever seem to have) really sucks donkey balls. AC Moore and other craft stores have tie dye kits that will get you started. Naturally, the net is a great place to find procion dye suppliers.

You only need three colors: fuschia, turquoise, and yellow. Combining these colors will provide a nice gamut.

Make sure you first treat the fabric with a solution of sodium carbonate (NOT Baking Soda, which is sodium bicarbonate, and is not basic enough). Let it soak in a solution of 1 cup carbonate per gallon water for at least an hour. This soaking will activate the fabric toward reacting with the dye. Wring out the fabric thoroughly (use gloves, the pH of this solution is about 14, and will burn your skin).

For the typical spiral rainbow pattern tie dye:
Flatten the fabric onto a plastic garbage bag. Place a 1/4" dowel (or a pencil) on the fabric where you want the pattern to be centered. Holding the dowel firmly into the fabric, turn it. This will start to spiral the cloth, with many folds, around the dowel. Continue to turn it until the fabric forms a tight bundle. While the dowel is still in place, place three rubber bands around the fabric, separating the pleated surface into 60 degree quadrants (just like a Trivial Pursuit piece carrier). These rubber bands will hold the bundle together, and act as guides for dyeing the fabric. Remove dowel. Cover half the fabric with each of the three (fuschia, yellow, and turquoise) dye colors. These halves overlap each other, only mixing with ONE of the other colors in a quadrant (e.g. the yellow half will have a quadrant in which it mixes with fuschia, a quadrant (in the middle of its half) that is yellow by itself, and a quadrant in which it mixes with turquoise). Be careful around the center 1/2" or so. Only fill it with one or two of the colors, or it will turn to brown mud.

Let the fabric stand for a day. After a day, rinse thoroughly with cold water. Wash by itself. You may now wear it. The following diagram may help visualizing how to apply the dye to the bundle:

                     /----             ----\
                  X//                       \\\
                // \         fuschia          X\
              //    \\                       //  \\
            //        \\                   //      \\
           |/           \                //         \|
          ||  fuschia    \\             /   fuschia  ||
          |      +         \          //       +      |
         |    turquoise     \\      //      yellow     |
         |                    \   //                   |
         |                    // \\                    |
         |    turquoise     //     \                   |
          |               //        \\    yellow      |
          ||             /            \              ||
           |\          //              \\           /|
            \\       //     turquoise    \\        //
              \\   //           +          \     //
                \X/         yellow          \\ //
                  \\\                       ///
                     \----             ----/
Other tie-dye patterns:

Decide where you want the stripes to originate from, and start placing rubber bands at intervals along the article in that direction. You will probably need to adjust the material where it bunches up to assure even exposure to the dye. Striping can also be achieved through fan-folding material.

More of a complete lack of a pattern than a pattern, random tie-dye is achieved by banding off random sections of the article to be dyed. Every time you do this, it will look different, depending on the spacing and position of the sections.

Heart, star, or other geometric shape:
The object is to separate the shape you want with the line where the fabric is banded and the dye does not reach. One method is to mark the outline of the desired shape lightly with a washable pencil, take a needle and some thread and baste around the edges. Pulling the thread tight should cause the outline to form somewhat of a circle that can then be banded off. You might have to make some adjustments to make as pure of a shape as possible. This may require practice, and round shapes are much easier to make than those with sharp lines. In fact, you may want to 'cheat' a little by marking the shape off with tape and spraying it with dye, keeping that section of the material separate from the rest.

Tie-dying is an unpredictable art, and every tie-dyed article will be unique. The more you dye, the better you will become at predicting what patterns certain methods will create. Experimentation with new methods and variants of existing methods can bring about incredibly unique, beautiful patterns. Then when people ask you, "Did you make that yourself?" you can answer "Yes, I did!" with pride.

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