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A signal is an entity placed on tracks which indicates to trains when it is safe or unsafe to proceed. Trains will pass from the front to the rear of signals such that a driver could read the lights placed on its front. If a signal indicates 'unsafe' (red), a train will wait patiently at the signal until the signal indicates 'safe' (green). All signals in Train Fever are path signals as opposed to block signals.
Signals are critical when multiple trains are using the same length of track. They allow safe passage of multiple trains.