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I am running the following command:

7z.exe a -t7z -m9=LZMA2 test.7z test.txt

However, I get this error: System error:The parameter is incorrect. The error only occurs if I use the -m9=LZMA2 or -m9=LZMA switches. If I remove it, it works perfectly fine. What am I doing wrong?

I am executing the command from Windows XP, 7 and 2008.

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Your command works on my end - which version of 7zip are you using? – zb226 Aug 26 '12 at 21:26
@zb226 - Version 9.20 – PeanutsMonkey Aug 26 '12 at 21:35
Weird, that's the same version I'm using... If I change LZMA2 to something bogus, like xyz, I get the The parameter is incorrect. error... And using LZMA works too, btw. – zb226 Aug 26 '12 at 21:41
@zb226 - Would anything else cause the issue? – PeanutsMonkey Aug 26 '12 at 23:16
Tried it on another machine today and it works there as well (exactly as stated above). Did you download it from here? For reference, the MD5 hash is 42badc1d2f03a8b1e4875740d3d49336. – zb226 Aug 27 '12 at 10:30

I believe you're misinterpreting the meaning of the -m? switch... -m9=lzma2 doesn't give you better compression than -m0=lzma2, that's the -mx switch.

Try this instead:

7za a -t7z -m0=lzma2 -mx=9 archive.7z files

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