Research the various digital lighting options. If you have an above-ground pool, you need to focus on hanging lights, and for an in-ground pool, recessed lights work best.
Install the light per the factory instructions. For above-ground pools, this requires running power and hanging the light over the side. Some battery-operated lights are available as well. For in-ground, you must drain the water below the recessed light prior to changing the bulb.
Tighten all fittings on the light to ensure that the water seal is tight. If any water gets inside the fixture, you can short out your entire system. For in-ground pools, a short can mean having to get the entire lighting unit rewired by an electrician.
Test the light without water first. Cycle through all the color choices as well as the timing options on your particular lighting unit. For in-ground pools, do this prior to refilling the pool. For above-ground pools, you can hold the unit in your hand and test it.
Set the timer to rotate through the colors. This allows for the automatic change of color in the water.
Refill the pool if necessary, watching the light fixture to make sure no water is encroaching on the inside of the casing.