Despite appearances, the colonial dragoons are not really cavalry but mounted line infantry, riding into a battle then fighting on foot.
Horses give mobility, not shock value in combat. Colonial dragoons do not charge home, but ride to critical spots on a battlefield where infantry firepower is needed. They carry smoothbore, muzzle-loading muskets with shortened barrels (to make reloading easier) originally called “dragons” or dragoons; over time, this name transferred to the men. Colonial dragoons are also useful for riot control and civil suppression (“dragooning” is to bully people into a course of action). Their usefulness as infantry and “cheap” cavalry means that they can put down all kinds of trouble, as cutting down dissented natives is beneath the dignity of proper cavalry regiments.
Historically, dragoons slowly became cavalry soldiers like any other, and stopped fighting as mounted infantry, although many regiments did retain the name. The cavalry had always regarded them as (lower paid) social inferiors, and the infantry had resented them as not being proper footsloggers, so the dragoons welcomed their new acceptability.
Colonial Dragoons are nearly identical to Dragoons. They only difference is that whereas Dragoons are recruited in Europe, Colonial Dragoons are recruited in the Americas and India. They are numerous, cheap early game cavalry, and can double as infantry to provide extra firepower. As with the other dragoon variants, however, they are neither as numerous as Line Infantry nor are they as powerful as dedicated melee cavalry.