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TrueCrypt allows you to create a storage area for encrypted data. This area is called a volume and is similar to other storage areas such as drives or removable disks. The difference is that it encrypts files as they are saved to it. Additionally, it unencrypts files as they are opened from the volume.
The following steps show you how to create a TrueCrypt volume on a device called a partition. Specifically, this document will refer to encrypting a USB device.
WARNING: Any existing files on a USB drive should be relocated prior to creating a TrueCrypt volume on the device. If not moved, any files on the USB drive will be overwritten and therefore lost.
Connect the USB device
From the Start menu, select All Programs » Utilities » TrueCrypt
The TrueCrypt window appears.
Click CREATE VOLUME
The TrueCrypt Volume Creation Wizard appears.

Select Create a volume within a non-system partition/device
Click NEXT
Verify that Standard TrueCrypt volume is selected

Click NEXT
The wizard window refreshes to Volume Location.
Click SELECT DEVICE …
The Select a Partition or Device dialog box appears.

From the Device list, select a partition or device
Click OK
NOTES:
A confirmation dialog box appears.
Because you will be creating a volume on the entire device, any existing files will be overwritten.
Click YES
The wizard window refreshes to show the Volume Location.
Click NEXT
The wizard window refreshes to show Encryption Options .
Click NEXT
The wizard window refreshes to show the Volume Size.
Click NEXT
The wizard window refreshes to Volume Password.
OPTIONAL: To make it easier to create and confirm a long password, select Display password
In the Password text box, type a password
NOTES:
Read the suggestions provided in this window.
For additional information, refer to Password Protection in the Overview document.
WARNING: Forgotten pass phrases cannot be recovered or reset.

In the Confirm text box, retype your chosen password
Click NEXT
The wizard window refreshes to Volume Format.
Within the wizard window, move your mouse randomly for at least 30 seconds
NOTES:
The duration and randomness of mouse movements enhance the quality of the encryption key as it is created.
Read the information in this window.
Click FORMAT
A confirmation dialog box appears.
Click YES
Another confirmation dialog box appears.
Click OK
Click OK
Click EXIT
Before you can use this volume for storing and encrypting files, you must mount it.