Altimeter readout AGL or sea level

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I mostly have been flying at sea level so the altitude reads near 0 when on the ground. How about when you are starting above sea level? Does it read near actual altitude? Thanks
 
I suppose it sets the pressure on the altimeter to read 0 at takeoff, as the pressure won't vary significantly during a short local flight? So the altitude is relative to the take off point.. Has anybody tried taking if on a hill and flying lower than the takeoff point? Does it show negative altitude?


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