Your TEST site is a whole new folder and new database. That's IN ADDITION TO what you've already got for your live site.
The idea is to set up an ADDITIONAL completely separate site for doing all your testing, so that your old site can stay "live" and making sales while you prepare your upgrade.
If you don't know how to create an ADDITIONAL (that's what we mean by "new") database, then talk to your hosting company for help.


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