As pwet pointed out, red compound is usually just iron oxide, and in spite of the particle size being small, it's not very hard. Doesn't abrade hardened steel well (if at all), and is generally intended for use on softer 'precious' metals (hence the common name 'jeweler's rouge').
(Edit: I have a strop block loaded with red rouge compound. Tried it out, just to see how it'd work. Couldn't see any difference over stropping on bare leather alone, or on my jeans, which I often do after stropping on green compound. So, now I use this particular strop block as the backing for my sandpaper convexing.)
The green compound is much, much harder and also quite small on average (many are ~0.5 micron). Works much better for polishing (abrading) hardened steel.
As for loading a strop with compound, there's little or no need to put it on heavy (as in liquefying it, and really soaking or caking the leather with it). I tried that a while back, and ended up removing most of the compound I applied. When it's really thick, it's sort of like stropping on mud. The excess compound will just be pushed around on the surface, and will also collect on the blade. It doesn't provide any real benefit like that. The compound at the very bottom of the layer, which has a chance to actually embed into the leather's fibers, will work the best. The 'crayon' method works well to coat the fibers lightly, and any excess can & should be wiped away with a paper towel. The leather should still look like leather, but with a green tint to it.
