I'm a trader on Dwilight. I'll add some info here, although I'm about to leave work.
Trader Unit
Traders should maintain a small, strong, cheap unit. Focus on armor above other values--you you get caught in a battle, you want your unit to keep you from getting captured, not fight off 50 monsters. I typically keep about a dozen men, to fend off bandits. However, I stick to sea routes--if you journey across the wilderness of western Dwilight then you may want two or three times as many. Your goal is to avoid conflict wherever possible--if you get wounded, or thrown in jail, then your realm may starve.
Merchant Chats
Merchant chats do work, at least on testing, although they are not very useful. Many of the reported regions have no buy/sell value set, (which I find odd, since you almost always have either a surplus or a deficit.) The reports typically report on the 20 regions closest to you, with some randomness, but if you do 5 merchant chats in a row you will likely hear from 30 regions, rather than 100.
Number of caravans
It takes twice as long to move 12 caravans, as it does to move 6 (or roughly twice as much). You will move VERY slow. This is only worth doing for very long routes, where you can actually buy 1200 bushels of food. Caravans also cost money. I suggest starting out with 4 caravans, then buying more once you decide you like being a trader, and find better contacts.
Contacts
Speaking of contacts, your best contact is a duke with sufficient clout to do your food gathering for you. It takes a lot longer to travel across a realm, buying 100 bushels from every local lord, than it does to have all that food ready for you in a single city. Note that setting up this arrangement takes time, so do this before you journey out from your home realm. Bankers can be very helpful with this task.
