Open fighter factory, and click on the "Open Character" icon, on the top left, that looks like a blue folder.
Look for the Chars folder and open it.
See this video for more detail on the following procedure.
Then scroll through the character you want to use, open it's folder, and the open it's .def (Definition) file.
Now the character is opened in fighter factory, click on the Polaroid icon to go to the character's sprites.
Go to the right toolbox and tick the "Auto apply palette" to display all the character's palettes.
Click on the right arrow that it's located on the left tool box. press it until you find the first character's sprite. Usually it's the stance sprite.
You can use the + magnifier to amplify the sprite.
Careful not to move the sprites out of their place, if you do re-open the character and start over.
Click on the "Eye drop" tool, located on the right toolbox, and click on the colour you want to change. (On the character it self)... or alternatively click on the colour located on the palette bellow the right tool box.
Click on the icon next to the "Eye drop" to it's right, and the palette colour editor pop up will come up.
Select the new colour you want to replace it with, and click ok.
Next click on the "Apply colour" icon, which is the one with the arrow pointing down to the right of the "Eye droper", to apply the new colour.
Do this for every colour you want to replace, but make sure you follow the patterns, as you don't want to mess up the palette.
Once you are happy with the new colour, you can either save it (Click the floppy disk icon to save) to replace an existing individual palette called ACT... or you can create a new one (Click the double floppy icon to save as).
When you save as, remember to keep the name short, don't go berserk with names, something like colour7 will do.
We're almost done.
After you saved your ACT, if you have replaced an existing one, then no further modifications are necessary.
However, if you created a new one, you will have to make some further adjustments.
Bare with me.
Go to your character's folder, and open the character's def file.
on there you will see the following:
I only placed what we need for this tutorial.
So first you need to add your new ACT to the list for it to take effect.
Mugen can support up to 12 valid ACTS, so make sure you don't have any more than 12.
make sure you place the exact same name you used when you named your ACT.
So now that you added you ACT to the list, it's ready to use. Save everything and try it out.
Since Mugen only has 6 buttons, but 2 per palette, you have to hold the Start button, for the next 6 ACT files to come to effect.
For instance, if you want color 3, simply press button 3, however if you want color 9, you must hold the start button and then press button 3.
Some characters can't be edited, sorry but that's just the way it is.
Some others need converting before editing.
If you mess up, just re-open the character before saving anything and start again.
You can also change colors, by going to palette in the command menu in fighter factory, on the drop menu select "color effects" and then select one of the "change color" commands.
However, this not always has the desired effect.