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Trading 101: How a Stock Can Lose You Money. - YouTube
Channel: ClayTrader
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I've talked about how stocks make you
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money but let's talk about the flipside
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how can a stock how will a stock lose
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you money right off the get-go why do I
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say how will a stock lose you money cuz
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everybody loses money in stocks and
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that's why diversification meaning a
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bunch of different stocks is so
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important because stop right now if you
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think that you're gonna be some stock
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protege that's that's never gonna be
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wrong or anything like that even Warren
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Buffett has lost money but you know 101
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how does a stock actually lose you money
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and to me I guess it's just I overlooked
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this but I've had several comments come
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in and people which makes sense they
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always take it to the far end of you
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know being drastic but I've gotten a
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couple messages such as this can you
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always sell what if there is no buyer
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what happens then but what if you do not
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have any people to buy your share like I
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said people always going drastic what if
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there's absolutely zero people to buy a
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share after you've gotten it so I will
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look at that in a minute but let's just
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kind of break down what's going on here
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so that is you and you have bought a
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stock for $25 so you have put $25 into
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the market meaning $25 is at risk well
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exactly how is it at risk how are you
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going to lose money after buying a share
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for $25 if you get this that's fine you
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can stop the video there's a reason why
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this is a trading 101 I get it it's
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basic but some people when you're brand
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new it's a valid question but how are
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you gonna actually lose money on it and
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we remember you have put $25 into a
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market and I'm not gonna go all
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economics on you but just understand
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that a market is made up of a bunch of
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people buyers and sellers so over here
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is you know the remainder of the market
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you have people all over the place and
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they are just part of the market
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now the key thing here is in how a stock
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will lose you money is this market has
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got to be willing to look at the stock
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so we'll go with stock XYZ very creative
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on my part hi so stock XYZ you bought
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for $25 all the market needs to be
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looking at this and at least somebody
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needs to be able or neat not only needs
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to but wants to pay $25 and one cents in
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that case well that would mean you would
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actually be able to make a penny because
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you bought it for 25 but if somebody in
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the market is one a Pepe 2501 then hey
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you made a penny if somebody's willing
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to pay 26 then hopefully you're saying
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okay then that means I could make a
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dollar on it because someone's willing
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to pay it down or more than what I
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bought it for but then there's a flip
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side let's say that everybody's looking
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at this and the market as a whole is
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saying you know what I'm only willing to
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pay twenty four ninety what did you buy
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it for 25 I don't to insult your
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intelligence on the math but 25 minus 24
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90 equals 10 with a minus there so you
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actually are now losing 10 cents on this
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transaction because the market the only
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price anybody's willing to pay in the
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entire market is twenty four ninety what
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happens if the market is now saying no
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I'm willing to pay $20 for that again
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not to insult your intelligence but you
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bought it for twenty five if the markets
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only willing to pay $20 for it and that
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would be you know 25 minus 20 equals
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five five dollars but of course it's
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down so you put a negative right there
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that means you are now losing five
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dollars you put twenty five dollars into
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the market but the market is telling you
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and that wasn't the best choice because
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now it's only worth twenty who says it's
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worth twenty well the market if people
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are only willing to pay $20 for it by
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definition that's what it's worth right
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worth is only what somebody's willing to
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pay and if the markets only willing to
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pay 20 well and now you're losing five
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dollars so
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let's take it to the drastic end what
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happens if nobody out here I mean nobody
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wants to even touch it at all that means
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people are willing to pay what if
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nobody's willing to pay anything then
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well that would be zero meaning you have
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lost how much if you bought it for 25
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and nobody wants to buy it from you
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then what does that known as well that
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would be known as worthless worthless
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numerically is known as well being worth
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zero dollars meaning you have lost all
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25 dollars now does this happen often no
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I mean if you're talking with Penny
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Stocks and stuff like that yeah this
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could happen but most times you'll be
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able to sell it but sometimes and you
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know it's going to be your to sell a net
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worth or for less than what you bought
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it for hence a loss that's how a stock
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will lose you money and does lose you
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money because you got to make sure that
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as soon as you buy it the idea is
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eventually somebody else in the market
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is going to be willing to buy it for you
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at a higher price that doesn't always
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happen now that's why that's and that's
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where the strategy comes in maybe
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thinking oh that sounds like a pretty
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big challenge I need to buy something
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that somebody else later on is gonna be
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want to pay me more for that sounds fun
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well yeah that's why the stock market is
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quite it's a very chick it's the game of
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games because that is the game but the
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kicker is this game involves real money
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your money so that's why you can't just
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go out there and just start randomly
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doing stuff because if you're stupid and
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I was stupid a lot of people are stupid
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when I first get started in trading in
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the stock market then you know they're
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buying stuff and then they find out oh
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nobody else is willing to buy it for
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what what I want to you know ideally
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sell it for so that is how a stock loses
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you money it's just based off of what is
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the market willing to pay you for and if
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they're willing to pay you for it worth
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a price less than what you bought it for
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well then that's where you got to start
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to do the math and figure out how much
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are you actually losing with again the
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drastic case being if there are no
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buyers then that means that you it is
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worthless if I if you go to somebody and
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say I'm trying to sell my car but it's
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worthless you would understand them
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saying well that means that your car
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must be a really piece of
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garbage because there's not anybody out
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there that's willing to even give you a
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dollar for it yeah that is worthless so
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that is what's going on there but again
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I'm not trying to steer you away from
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the stock market could this happen well
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sure it could happen but you know if
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you're focused on the stocks that you
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should be focused on then the likelihood
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of that happening is very very tiny but
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that is how the dynamics and the math of
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you know just a loss within the market
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works if you are out there trading alone
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currently and maybe are in the market
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looking for a community to join to
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assist you in your trading or to just
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help you you don't give you another set
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of eyeballs that I do have a private
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trading community where you can trade
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alongside me and other experienced
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traders so what you see popping up on
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the screen right now is both an
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information link so if you click on the
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inner circle one that is going to take
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you to the page where I explain all the
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details of what exactly come with the
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community both the chatroom and the
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newsletter and then the other image that
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is popped up is a behind-the-scenes tour
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where you can see exactly what is going
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to you know be contained within the
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community I take you through like I said
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behind-the-scenes tour of everything and
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that way you'll know precisely what you
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are getting you know when you join so
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definitely check that stuff out if you
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are interested and thinking about you
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don't want it to join a community and
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let me know if you have any questions
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