Colors

Green should definitely be the "normal" position. Red for "reversed".

Colors

My prototype railroad used green = normal, red = reversed outside yard limits. Within yard limits green = normal, yellow = reversed.

Switch stand indicators vs. dwarf signals

Point of terminology.  In prototype parlance, the "turnout route" IS the "divergent route".  The diverging part of a switch is the "turnout".  The terms used almost universally are normal and reverse.  In most cases, normal is the straight route and reverse is the divergent route.  Those are the terms used in the rule book and the dispatching systems. 

Also dwarf signals are typically block signals, so are more than a switch indicator.  In most cases a dwarf signal is used on the "frog end" of the switch on the diverging side and would be stop when the switch is lined normal and some form of proceed when the switch is lined reverse.  On a switch stand the signal is on the points end and is yellow or green when lined normal and is red or yellow when lined reverse.  So the indications are typically swapped between dwarf signals and switch indicators.

Dave H.

Which way does the dwarf face?

 dwarf signal is used on the "frog end" of the switch on the diverging side and would be stop when the switch is lined normal and some form of proceed when the switch is lined reverse.

Is this because the dwarf is to be read primarily by the engineer approaching on the divergent route? He can proceed through the switch only after it has been thrown to reverse.