I have now resolved the problem now. The MXD I was working from did not have it's spatial reference defined and ArcMap didn't like it.
Of course ArcMap being as helpful as it often is, allowed me to trace a complicated feature and only then throw up an error message once I had finished my sketch. On top of that it then deleted my sketch so I had to start all over again. Just one of the ways ArcMap tries to be helpful but fails.
Kind regards
Tim