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It should be set with 0 degrees at True North to make the co-ordinates correct, the compass can be used to determine True North by applying the declination when you set it up. For example, here on the NSW coast the declination is 12.3 degrees, so True North is 12.3 degrees to the west (or left) of magnetic north. Many compasses have a rotating rose that allows you to set a True North pointer.
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