Freeware: Greenfish Icon Editor Pro 1.1
Greenfish Icon Editor Pro 1.1 is a easy to use freeware for creating icons, cursors, and other small pixel graphic images. It’s not only free of charge but it does not require any installation.
I have tried this powerful icon builder. Its interface is user-friendly and sample icons are included as well. Lot of filters like Drop shadow, Inner/Outer glow and bevel can be found too. If you’re going to create a favicon for your website, this is the tool you’re gonna like it. 
How to create an icon by using Greenfish Icon Editor Pro 1.1.
1. Download Greenfish Icon Editor Pro 1.1 and unzip it.
2. Double click IconEdit.exe to run the program.
3. Click File - Open, to open a PNG or JPG image.
4. Click Icon - Click icon from image, to create an icon from the active image.
5. To save it as an icon(.ico), click File - Save as.
6. In the Save as dialog box, type in a preferable file name with .ico extension. For example: “MyIcon.ico“. Then in “Save as type” option, select 
“Icon file(*.ico)“. Click save to save icon file.
Note that if you forget to type your file name with .ico extension, the file will be not recognized. 
Enjoy!
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