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New with Final Cut Pro 7 is the ability to create an Alpha Transition. This uses a third video clip to transition between two clips using some form of a wipe.
In this tutorial, Larry Jordan shows you how to create these transitions. He starts by creating a clip with an alpha channel (transparency), then how to use that clip to create your own customized alpha transition. He also shows you how to create an alpha transition even if you don’t have a clip with an alpha channel.