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Before you start pulling links and pissing off link partners, let me say that I have a number of sites suffering from this "penalty" and none of them have link trades with other sites, so the "link farm" thing may not be the problem. In my case it could be interlinking between my own sites that's done it, although I'm only guessing.
I feel like I should start a new thread about this, but I'll write it here anyway. It feels as though we as adult webmasters could start using the "nofollow" attribute to distinguish between links for traffic and what we could call "full links".
Pulling link trades is not a good idea because you piss off your partners and you also lose a source of traffic. But if you think it's a problem you could contact your partners and inform them you're going to nofollow the link.
If reciprocal links are no longer much use under the new algorithm, then a link trade to improve ranking is not as appealing and the focus becomes traffic.
At the same time, reciprocal linking between similar sites is still a good idea, I think.
I'm talking out of my arse here, just thinking out loud.
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