What must you do in this situation?

Your answer is correct because in this situation you must stop in front of the level crossing. The presence of the flagman (person holding the red flag) means that a train is approaching or passing, and it is not allowed to drive past him either to the left or to the right. German traffic rules require you to stop when a flagman signals a stop at a level crossing, ensuring safety and preventing accidents with trains. Driving past the flagman is illegal and dangerous because the crossing is not clear. Always wait until the signal or the flagman indicates that it is safe to proceed.