The setup for this demonstration is a Printbot Simple running on Repetier Host.
Feel free to download the safety sign.
This is a easy 5 step process to change colors, using a single extruder.
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Step 1: Click the Pause Button
Click the pause button at the begging of the desired layer to change color.
Step 2: Raise Your Z Axis
Step 3: Clip Excess Filament
Step 4: Swap Out the Color
Step 5: Continue Printing
Sped up footage of second color lettering.