[tenth]

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I went to Configure Observed hands, I set the folder to EmpirePoker/Handhistory and I chose not so store the files to the hard drive.

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What version is your Poker Tracker?

I don't have an option to "configure observed hands", and I didn't have to make any changes to the "Program File Locations" settings for importing hand histories, which should be pointed at the executable for Party/Empire/etc, and not the Hand History directory.

If you really have those options, you're probably due for an update.