If you are using copilot and you want to try the local coding agent, then you need to first deactivate copilot in the extension manager. Local coding agent has the advantage that your source code is not transferred into the cloud. If you work in a company they might demand this from you.
Then first install the continue.dev extension. Follow the code tour (only works in the source code view of vs-code)...
Next we need to install a locally deployed AI model runner: Ollama. Follow the the code tour (only works in the source code view of vs-code)...
open command line and install the needed languange models:
ollama pull dengcao/Qwen3-Reranker-0.6B:Q8_0
ollama pull danielsheep/Qwen3-Coder-30B-A3B-Instruct-1M-Unsloth:UD-IQ3_XXS
ollama pull hf.co/dat-lequoc/Fast-Apply-1.5B-v1.0_GGUF:latest
ollama pull nate/instinct:latest
ollama pull nomic-embed-text:latest
ollama pull Qwen2.5-coder:1.5b
in %USERPROFILE%.continue\config.yaml (for windows). And probably homefolder/.continue/config.yaml for linux and mac.
name: Local Config
version: 1.0.0
schema: v1
models:
- name: Autodetect
provider: ollama
model: AUTODETECT
roles:
- chat
- edit
- apply
- summarize
- autocomplete
- rerank
- name: embeddingsProvider
provider: lmstudio
model: text-v2-moeext-embedding-nomic-embed-t
roles:
- embed
context:
- provider: code
- provider: docs
- provider: diff
- provider: terminal
- provider: problems
- provider: folder
- provider: codebase
the following configurations needs to be set in continue extension by selecting open settings from the continue menue (bottom right):

Now you can use continue to tap complete your code but also to chat.
To open the chat window you can do the following press CTRL+SHIFT+P then type View: toggle continue.
In chat - which you open with CTRL+L - you can type for example type:
please explain me this codebase @Codebase
how does this file work @filename
and click on file.
you can also mark a text and press CTRL+I and say for example: make comments.
Lets make a different thing how about a fibonacci [$f(0)=0, f(1)=1,f(n)=f(n-1)+f(n-2)$] number calculator.
lets make life a bit hard for ai by starting with something completely corrupted:
<!doctype html>
<html>
<head>
<title>My recipie page</title>
<scipt>
//fibonacci function returning n-th fibonacci
<H1>Recipies</H1>
console.log('Hello');
<H2>Pancakes</H2>
<p>Ingredients</p>
<ul>
</ul>
<!-- add input field -->
<input type="number" id="portionInput" name="portionInput">
<script>
// Add script to recalculate amounts
const input = document.getElementById('portionInput');
input.addEventListener('input', function() {
// Recalculate amount based on input value
});
</script>
</body>
</html>
and just put your cursor where the fibonacci function is and try to press tab to get the results.
Then use the life server extension to see the result. It does not work.
Ask the ai chat to correct it itteratively.
Next we will use an ai coding agent that can even generate complete projects.