Make Realistic Flag in Photoshop

today we create a psd file that look like :

lets start. 
take a picture of flag (vector). 

open below type picture. and make it same size. 

select second picture and apply desaturate filter (image > adjustments > desaturate)

now  go to filter > gaussian blur and select radius number depending of the document size

save the image as PSD format. we set the it named cloth. 

ok, go back our first picture (flag).  apply displace filter (filter > distort > displace).

select this option as in picture. then press ok.

when appeared "choose a displacement map" window. here select cloth psd file and click open button. 

you get this is type of picture. 

now go to second picture and select all then press copy command. 

paste the second picture into the flag picture. 

center them. 

select hard light in layer's palate.

you get nice realistic flag from vector picture.