I wouldn't completely agree with your translation. The verbs to indicate, to show, to point, don't necessarily have to mean to choose. Think of a situation where a mother is showing her son a colorful kite. She could point her finger at the red color and say, "Look at the cheerful red." Therefore, she'd be pointing to the red color; not picking it. But of course, in the correct context, one or all of these verbs could be translated to "to choose."
The problem with this translation is that "You indicate the color" may be correct but it is not a common usage in English. Perhaps a different sentence could be used in the lesson for indicate, since it is usually used for something more abstract than a color: "Please indicate your preference"