Dragon Shrine

Continue upstairs and defeat the ancient knight. There's a Pharros Contraption behind the crates and barrels under the stairs. Use a Lockstone to reveal a secret room that has a Staff of Wisdown and the Judgment armor set. There's also a doorway to the right beside the first flight of stairs that has a chest containing Bonfire Ascetic x3.

Continue to the second flight of stairs and defeat another ancient knight. Enter the building to the left and go upstairs. There's a heavy knight guarding a chest here; be careful of the undead cleric in the gondola in a short distance; he can fire fast, homing projectiles that can knock you back with small damage. It will be a good idea to ignore the knight first and kill that cleric first.

Loot the wooden chest then loot the hanging corpse to get a Faintstone. Jump to the lower ledge to reach the chest there containing Drakekeeper's Greataxe and Drakekeeper's Greatshield.

Go back to the main path and continue upstairs to face two ancient knights. Kill them but don't go up the red door yet. Cross the small bridge and drop down the ledge past the wooden crates to reach the two chests below. Loot the Titanite Slab from the chest to the left. The one beside the ledge is a mimic; kill it to loot the Washing Pole and Petrified Dragon Bone.

Follow the path and you'll run across a shielded Drakekeeper. Defeat it and loot the corpse in the alcove near the door to get a Skeptic's Spice and Twilight Herb. Open the next door and head inside. Dark Spirit Dragonfang Villard will invade you as soon as you enter as well. Loot the Third Dragon Ring from the chest.

Continue upstairs and take out Villard. Loot the Petrified Egg from the pedestal and loot the nearby chest to get a Watchdragon Parma. Drop to the lower ledge to find another chest containing a Crystal Magic Weapon, then drop down to the lower ledge again to return to the red door earlier.

Open the next door two doors and continue forth. Past the two Drakekeepers are fast Dragonfang warriors. These guys are nimble and will be able to evade your attacks then counterattack so treat them like you're fighting another player.

Continue forth and talk to the Ancient Dragon. You'll receive the Ashen Mist Heart from it. This is an optional battle. You can attack it deliberately to stir it to battle.

Boss: Ancient Dragon

This boss has only two types of attacks; the fire breath while on land and the fire breath while airborne. Both are very easy to dodge; you just need to keep your eye on the dragon, while regularly switching between lockon and regular camera view. Take note that getting hit by its fire attack will instantly kill you so when you see it fly, run as far as you can. It is vulnerable while breathing fire on land. Melee characters should exploit this vulnerability while maintaining enough stamina for them to run just in case the dragon uses its airborne attack.

Ranged characters should stay at medium range so they can run towards the dragon, past its head to avoid getting killed by the fire. Don't be greedy with your attacks; keep an eye on the dragon's movements and your character's stamina then attack only when needed. You should be able to defeat the Ancient Dragon and take home a huge amount of souls.