1. Close Traktor Pro S4.
2. Go to “C:\Users\whateveryournameis\Documents\Native Instruments\Traktor S4 1.0.1″ and locate the file “Traktor Settings.tsi”.
3. Open the file in Notepad and on line 159 you’ll find:
“<Entry Name=”Recording.Source” Type=”1″ Value=”-1″></Entry>”
4. Change Value=”-1″ to “Value=”2″
5. Save & Close the file
6. Open Traktor Pro S4 and go to the preferences
7. Go to the Recording panel & you’ll see that the option “Internal” is now de-activated, that means it will record from whatever External Input you select in the dropdown list below (ie. Channel C)
8. Go to Input Routing and select “In: Ch C Left” and “In: Ch C Right” for Input Channel C.
9. Connect the cable to your Channel C input on the S4 controller & Press record 
That’s it.
PS: DO NOT click on “Internal” again after you changed the file. This will put it back to the original state and you’ll have to change the TSI file again to disable it.
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Source: http://www.native-instruments.com/forum/showthread.php?t=121746
