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In this video tutorial, the creator demonstrates how to create a traffic light in Excel that changes colors based on specific conditions. The conditions are: sales amount over 30,000 results in green light, sales amount between 15,000 to 30,000 results in yellow light, and sales amount less than 15,000 results in red light. To set up the traffic light, highlight all cells under the column, go to conditional formatting, select new rule, change format style to icon set, choose show icon only, and adjust the type to number. It is important to ensure that the logical expressions match the conditions specified in the table.