Some inexpensive cameras just capture a band across the middle of the image sensor, leaving unexposed bands at the top and bottom of the image area. You can achieve the same effect with any image you've taken by using a photo-editing program to crop it.
You can use any camera to take a series of overlapping images as you pan the camera, and then use panoramic stitching software to assemble the frames into a seamless panoramic image. Since alignment is so important some cameras have a panoramic or stitch-assist mode that displays guide lines or part of the previous image in the series so you can accurately align and overlap the next photo.
A few cameras make it possible to stitch the images together in the camera and automatically ensure that exposure is the same from frame to frame so the images blend perfectly. These cameras may reduce image sizes to keep the file small enough to manipulate it in the camera.
Horizontal sequence left to right, or right to left, are used to capture panoramic landscapes
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Vertical sequence bottom to top, or top to bottom, are like horizontal but capture a panoramic view of a vertical subject such as a tower or waterfall.
Clockwise or counterclockwise sequence is used for documents or other square shapes.
Lenses. Zooming the lens to a wide angle, or using a short focal length lens, requires fewer pictures to cover the same view but makes objects in the panorama appear smaller and more distant. You should avoid using fish-eye lenses that distort the image.
Camera orientation. The camera's orientation depends partly on the scene that you are capturing. For most scenes the camera is mounted horizontally in landscape mode. This is easier to do and also requires fewer images to cover a scene. However, some scenes have vertical elements that require you to mount the camera vertically in portrait mode. Doing so gives you more height in the images but requires more images to cover the same horizontal area.
Levelness. The camera should be as level as possible as you take the pictures. In a 360-degree pan, the first and last images must overlap and line up when they are later stitched together. Some tripods have twin-axis bubble levels to guide you, but you can also use a small handheld level. One of the problems with leveling a tripod is that the place where you mount the camera and the join where the head rotates aren't necessarily parallel. This means that even when you level the mounting area, the camera may not rotate in a level circle. You need to take some time to get it right.
Exposure. The software you use to stitch images together can even out the lighting in a scene but it helps if you give it good images to work with. Some cameras let you use autoexposure lock (AE Lock) to ensure that exposure and white balance are consistent throughout the series of images. On other cameras, a special panoramic or stitch-assist mode locks exposure when you take the first image in the series. If necessary you can always use manual mode.
Lighting. Try to avoid extremes in lighting. These occur on bright sunny days when there are bright highlights and dark shadows. The problem is compounded if you have to shoot some of the pictures into the sun. If you can pick your time, pick a day when it's cloudy bright—overcast but with slight shadows on the ground. If the sun is out, shoot at midday to keep the lighting even. If you have to shoot at other times, position the camera so direct sunlight is blocked behind a tree or building when photographing in its direction. When shooting indoor panoramas, set up the camera to avoid shots of windows with direct sun shining through.
Rotation. When photographing a horizontal or vertical sequence, stand in the same position and rotate the camera. A tripod isn't absolutely necessary, but if you use one, pan-tilt heads are better for this than ball heads because you can level one axis and lock it in a fixed position, then rotate the camera.
Overlapping images. Images should overlap by 30-50% horizontally and not be out of vertical alignment by much more than 10%. Avoid placing subjects that move in overlapping areas, and don't combine nearby objects in the same scene as distant ones or they will be distorted. When possible, place a distinctive subject in each overlapping area to make it easier for the software to know how to combine the images.
Documents. When photographing documents, center the camera over each section and keep it at the same height for each shot.