8. Extension targets or as they called sometimes Expansions, are used as a potential levels for taking profits; 9. To calculate an extension target you may apply the formula: Extension = (X-A)*ratio + B, where X-A is the initial swing and B is the retracement point; 10. The “B” point should stand inside X-A swing and all upward/downward extension targets have to be above/below “B” point; 11. Coincidence of extension target with any Fib retracement level or Confluence area creates a stronger level and is called “Agreement”; 12. Sometimes, extensions could be used for support/resistance estimation. For that purpose it’s allows us to have a “B” point slightly outside initial swing “X-A”. 13. Although the Fibonacci tool is a type of leading indicator, because it shows potential support or resistance levels ahead the market – it doesn’t tell us much how the market will respond on these levels and which levels will hold. Yes, we’ve said that depending on retracement depth we can judge much about the market’s strength, but this is not enough. It means that we should apply Fibonacci tools only in a context of a potential trade and in combination with other tools. Now we’re already acquainted with support/resistance lines, trends and candlestick patterns that can be used with Fibonacci. But later we will learn more and study how to create a solid trading plan that will involve all the major tools. 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.