Early traffic officials borrowed the red-yellow-green code from the railroads, which used it for the track signals used to control trains.
The railroads chose red for the "stop" signal because for thousands of years it had been a signal for danger. Red is the color of blood. So if you want to tell people to stop lest they face death and destruction, red makes sense.
The other colors were pretty much pulled out of a hat. When the railroads got started in the 1830s and 1840s, the color for "caution" was green and the color for "go" was "clear" - white.
After a while, it became apparent that these colors presented some serious problems. It was easy to mistake an ordinary white light (say, a street lamp) for a "go" signal.
So the railroad decided to change to a more foolproof system - red for stop, green for go, and yellow for caution. Traffic engineers, knowing they had a good thing when they saw one, borrowed this system for use in stoplights.
The first electric traffic signals, which were installed in Cleveland, Ohio in 1914, used just two lights, red and green. Yellow was added within a few years.
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