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To add an image to you profile click on "Your Name", Preferences from the confluence menu at the top of the any confluence page, then click on Edit Profile, Profile Picture. Now select click Browse... to select the picture you want to upload, then click on the Upload button.
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Confluence only allows your profile picture to be 48x48 pixels, but you can upload a larger image, and confluence allows you to crop the image directly on the upload page. If the image is still too large after cropping it will automatically be scaled to fit the 48x48 pixel limit.
More documentation on profile pictures can be found on the confluence web site.
Adding profile pictures to the list of recently updated pages on your group space.
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More information on the {recently-updated} macro can be found here in the confluence documentation.