Firstly, if you are new, try and look in the crafting skills There you will see Alchemy.. There is a skill that highlights alchemy reagents on the ground, making them easier to collect.. Water, which is the base, can be found near bodies of water, and usually in crates in dungeons and such.. To create a potion, find an alchemist table in town, they are marked on the map, and start mixing ingredients to try out stuff.. As you make experiments, you will learn the traits of the ingredients, aka what they can do for you/against you