Just as the name implies, a Folder Track is a folder that contains other Tracks. Moving Tracks into a folder is a way to structure and organize Tracks in the Arrangement window. For example, grouping several Tracks in a Folder Track makes it possible for you to “hide” Tracks (thus giving you more working space on the screen), Solo and Mute several Tracks in a quicker and easier way, as well as edit and mix several Tracks as one entity etc. Folder Tracks can contain any type of Track including other Folder Tracks.
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