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Summary: A ligature is created when two or more letters are joined as a single glyph. Ligatures usually replace consecutive characters sharing common components and are part of a more general class of glyphs called "contextual forms", where the specific shape of a letter depends on context such as surrounding letters or proximity to the end of a line.
There are two methods for using ligatures:
The legacy method supports standard ligatures such as fi and fl in PostScript fonts.
The OpenType method, allows access to both standard ligatures and discretionary ligatures in OpenType fonts. [Both methods are applied as character attributes, meaning that you can apply them to any selected text.]
Important Note: You have to use an OpenType Font that actually contains Ligatures. You can check which Font contains OpenType Ligatures in the Glyph palette by selecting the Font from the Font popup menu, and then selecting Standard Ligature or Discretionary Ligature from the popup menu below it but you will have to select a Font that actually contains OpenType Ligatures to see Standard Ligature or Discretionary Ligature in the popup. Additionally, any OpenType feature you can select from the Measurement palette which is NOT available in the Font that is applied to the selected text will be in Square Brackets.
One can set preferences for ligatures by navigating to QuarkXPress/Edit > Preferences > Print Layout > Character:
Below are the steps to make Ligatures always ON: