Take a deep pan, preferably a steel one, since it helps you to see the colour clearly. Add sugar and 1 tbsp water. Bring it to heat. Twirl it once in a while, I usually dont stir it. It will start crystalising after 3-4 mins.
Dont worry keep twirling it. You can see the colour starts changing around the edges. Slowly the crystals becomes clear bubbles and it changes to a clear golden colour liquid.
Once you reach this stage, reduce the flame to the lowest and keep cooking till it reaches your required color consistency. If you feel that it's getting too hot in between, just take it off the heat for a few seconds. Make sure you twirl the pan in between.
Once it reaches a dark caramel colour (make sure it's not burnt), remove from heat and add warm water. It may splash, so be careful while adding it. Bring it back to fire. The syrup will be boiling for sometime. Keep twirling the pan and keep it on heat at lowest flame for another 4-5 mins. Remove from fire and let it cool completely.
Notes
It's a bit of time consuming process and it requires your undivided attention. If you follow the steps correctly, I assure you, you wont go wrong. I usually make this on the smallest burner. I melt the sugar on medium -high flame till it reaches the clear golden syrup consistency. once you reach that consistency, make sure you reduce the flame to the lowest. You need to keep a close watch on this, since the colour changes very quickly. I keep the water (1/4 cup) in MW for 30 seconds when the syrup has reached the clear golden syrup consistency. You can make this ahead and keep in the refrigerator for 4-5 days. Bring it to room temp, before adding it to the cake batter.