Step 5
Reselect the largest, red circle and make another two copies in front (Control-C > Control-F > Control-F). Select the top copy and move it 10px up using that same up arrow button from your keyboard. Reselect both copies made in this step and click the Minus Front button from the Pathfinder panel.
Make sure that the resulting shape stays selected, focus on the Appearance panel and set the Blending Mode at Soft Light.