Plot

Percy's playing pranks on Gordon and James cause them to hint about a railway-signal that doesn't exist, to confuse and trick him into making a mistake on the line.

Percy works in the yard and although he works hard, he can also be very cheeky and often plays jokes. One day, Percy's feeling particularly cheeky, and startles Gordon by telling him his train is ready. Gordon immediately thinks he's running late, only for Percy to reveal a line of dirty trucks. Gordon is cross and tries to think of a way to pay Percy out.

Percy then goes to James, and tells him that the Fat Controller has sent a message for James to not leave the shed until he comes to see him. James is delighted, thinking the Fat Controller wants him to pull a special and refuses to leave when his driver and fireman try to take him out. As a result, the other engines have to do James' work as well as their own. Finally, an Engine Inspector arrives and tells James to leave. James tells him about the message the Fat Controller sent. The inspector points out the Fat Controller couldn't have sent a message as he's away. Realizing that he's been deceived, James is furious and quickly leaves to find Percy, but Percy has disappeared. When the Fat Controller returns, he tells both engines off for causing trouble.

Sometime later, Percy boasts to Gordon and James. He announces that he's taking trucks to Thomas' junction and believes that the Fat Controller chose him because he's a really useful engine, although James thinks it's simply to keep him out of the way. The big engines then realize that they have a chance to give Percy a dose of his own medicine and claim they were talking about being careful with the signals at the junction, especially "backing signals". Percy, keen to show off, claims that he knows all about signals, but worries as he has never heard of them before.

Soon, Percy arrives at a signal set to "danger". However, when its arm moves to "line clear", it goes up instead of down. Percy, having never seen anything like it before, guesses that it's a backing signal, and begins reversing. Percy's driver is shocked and quickly stops him, but Percy insists that it's a backing signal, and tells him what Gordon and James had said. After the driver tells him the truth, Percy is eager to leave before he's seen, but before he can, Gordon goes past and sees that Percy fell for the trick. Humiliated, Percy quickly and quietly finishes his work.

That night in the sheds, Gordon and James talk about signals; while they think it's funny, Percy thinks they're being very silly.