A hamon (more or less - ha= edge, mon=waves ), is made by allowing a shallow hardening steel to have the exposed areas harden to martensite, and the covered areas forming pearlite. The whitish area where the two meet is the hamon. One of the better coating materials is Satanite. Many other furnace and refractory cements will do, but Satanite is probably the best.
This is how I do it.
Make a thin slurry of satanite, about like thin pancake batter. Coat the entire blade, and dry with a hair dryer.
Thicken the satanite slurry to a thick mud, about the thickness of heavy cake batter. Using a plastic knife, spread this on the blade side. Turn the blade over and repeat for the other side. Take your fingers and "wipe" both sides at the same time, to remove the mud where you want the edge to harden. ( the thin wash should stay, but it won't matter if it comes off.) Shape any desired pattern with a fingertip, wooden skewer, etc. Turn the blade over and repeat for the other side. Try and match fairly closely the waves in the clay, as you don't want one side insulated and the other bare. The spine can be covered or bare, depending on what effect you are trying for.
Thin down a little of the mud to a medium batter. Take the plastic knife, dip it in the thin clay, and tap it on the edge in such a way that it makes a thin diagonal line of clay from the coated side down to the edge. Repeat over the entire edge, spacing the lines in "X" shapes about every 1/2". These are ashi lines, and will make a more attractive hamon, and tend to help prevent cracking.
Allow the blade to dry well ( overnight) helping with a hair dryer if you like. Austenitize the entire blade at 1475-1525F for 5 minutes. Avoid overheating, but assure the entire blade is fully soaked. Quench in fast oil or brine. The way I quench W1/W2 is in 130 degree Parks #50, and I go in for a count of 1-2-3, out for 1-2-3, and back in for a count of ten. I pull the blade out , quickly wipe/scrape off any clay, and straighten immediately if there is any warp. Then back in the oil to finish cooling. After a quick check to see that all went well, I immediately temper at 400F for two hours. A second temper follows at the target temp, usually about 425-450F.
Walter Sorrel's DVD on Hamon is a great resource.
Stacy