How to Configure Your Mail Server Correctly!
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Now, you've followed the previous instructions and have ended up with 6 tabs:

Add 127.0.0.1 to the allowed relay list as follows:
- Click on the 'Access' tab
- Click 'Relay'
- Ensure the "Only the list below" radio button is checked
- Click 'Add' and type 127.0.0.1 (localhost)
- Click 'OK'

Now test your email again. This time it works! However, it may have been classified as 'junk mail'. Clearly you want to improve the chances of delivery, avoiding your email ending up in the junk mail folder. It's actually a RFC requirement for a mail server to be resolvable on the Internet. RFC 2821 2.3.5 - http://www.ietf.org/rfc/rfc2821.txt
Stop Your Email Going to Junk Mail
To do this you will need another DNS A record for your mail server. The next step is to enter the DNS A record into the SMTP server:
- Again, going to the Properties of the SMTP server
- Selecting the 'Delivery' tab
- Select 'Advanced'
- Enter the A record you have created (and pointed to your server) in the 'Fully Qualified Domain Name' space
- Click 'OK'

Once this is done the next step is to email ICO Support with your current DNS A record requesting the creation of a PTR (Pointer or Reverse DNS entry).
The use of a DNS PTR record in mail delivery is to verify that the sending mail server is who it claims to be by resolving the IP address to its A record.

And that's how you set up your Mail Server and avoid your email losing its way!