Add the sugar, water and bitters to a cocktail glass.
Stir to dissolve the sugar.
Add a large ice cube and pour in the whiskey.
Stir for 20 to 30 seconds.
Twist the orange peel over the drink to express the oils and run it around the rim of the glass before dropping it into the cocktail.
Video
Notes
The traditional Old Fashioned was made using a sugar cube with the bitters dropped on it and then muddled. You can still do it that way, omitting the teaspoon of water. You can also use 1 teaspoon of simple syrup in place of the sugar and the water, which is what I typically do.