What is the recommended way to backup a Magento website? Connect via FTP in terminal and run mysqldump command or use the backup function in the admin panel?

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You won't be able to generate the backups using FTP. Not unless you have shell access. Generating the backups from admin panel will be a good option if you are on a shared web host. It creates the backup & saves it under your root directory's var folder. Makes it easy for you to download via FTP.

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