By multi-coloured text I don't mean just a different colour for each letter. I mean that the colour bleeds over from one letter to another. Here we go.
Create a New file 10” x 8” at 72ppi in RGB colour with a black background. Click on the Type Tool and set the Font at IMPACT at 150pts. The foreground colour is immaterial although I like white. Type in “COLOUR” in uppercase then on the top menu bar select Layer>Rasterize>Type. Your type layer has now become a normal editable layer.
Open the Layers Palette and you will see a small box beside the word Lock at the top of the palette. Click on it to lock the transparency, and a lock symbol will appear in the text layer. On the top menu bar go to Window>Swatches and your curser will become an Eye-dropper Tool. Select a bright colour which will change the foreground colour colour.
Then select a soft-edged brush about 40 pixels and paint over the letter C and part of the letter O. Select a different colour and repeat the process until you have changed all the letters to a different colour. Neat eh?