In the first round of a draft, I usually just pick the best card from every pack. After that I look at what I've picked, try to pick good on-color card in the second pack, and pick whatever my deck needs in the last round.
I've noticed in some of the commentated drafts I've watched online that the players often establish their colors by the fifth pick and then avoid picking anything off-color unless its a ridiculous bomb. For example, if you open something like a Sorin or Garruk on the third pack, you should probably pick it whether its on color of off-color unless there's some amazing uncommon that would work perfectly with the cards you've picked so far. Aside from monetary reasons, its often worth splashing just for that one card, and at the very least you deprive some one else of an ideal bomb. Otherwise they remain faithfully on color no matter what passes by.
When should I determine what colors I'm playing in an MTG draft? Should I try to start staying only on color as early as the middle of the first pack, or what until the beginning or even middle of the second pack? If I pick early I get a wider variety of card in my color, but I may end up not playing another color/deck that could be far better due to my narrow-mindedness. How can I establish a successful balance between these two?