Commander in Pips: Look at Chart #2. It shows extensions from the same AB up swing: Chart #2 EUR/USD Daily. Extensions. Commander in Pips: See – extension, is a continuation of initial swing after retracement. In our case this is an up swing AB. Then market has shown BC retracement, that we’ve just discussed, and continued its move up further from point C. Take a look – it has hit 0.618 expansion from AB swing, that has started from C point at 1.4033 almost pips to pips and turn to retracement. The next expansion target is 1.0 at 1.4410. Pipruit: Ok, so, to build an extension we need: 1. Initial swing AB; 2. Some retracement from it – BC. Commander in Pips: Yes. That’s right. Pipruit: And how to correctly build them, to choose A, B and C points and… Commander in Pips: Ho-ho! Hold your horses, son. Don’t worry - we will get all the necessary details for using these tools in this Chapter in later lessons. But for now will be enough that you have learned today: 1. Ratios - 0.382; 0.5; 0.618; 0.786; 0.886; 1.0; 1.272; 1.618; 2.0; 2.618. 2. What retracement is and possible ratios for retracement - 0.382; 0.5; 0.618; 0.786; 0.886; 1.0. Also we’ve studied how it looks like; 3. What extension is and ratios for it – 0.618; 1.0; 1.272; 1.618; 2.0; 2.618 and how it looks like on the chart. P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon. Note: FPA ranks are earned in the battles against scam, not in the classroom.