Reciprocal links are not dead. However, quality links are trumping quantity of links. When you build links - recip or not - think TrustRank and not PageRank.
Even recips on Google supplemental index pages are OK - if the site is a quality, trusted web site.
For years, my strategy has been to trade links only with other sites that I consider to be quality web sites. Combined with very strong on-page SEO, this strategy has worked for me. In general, I my top ranked sites have 30%-50% less links than the other sites in the top 10.
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