Here's my experience as a trader, but I have no idea how typical it is for other people.
The goods that I can afford out of the gate have such a low profit margin compared to the constant rate my crew eats as I try to travel from where I start to where I can sell the goods, so it seems like I'm forced to spend any money I make on food rather than more cargo. Most of my trader games don't get out of the gate, as opposed to the pirate games where you start with a ship and crew that can beat half of the vessels out there.
If I do manage to get a lucky break, like a surplus and shortage near where I start, I will at least have a chance of surviving the first year. But then again, the merchant boats get sunk or plundered by other ships so frequently, which leaves me either dead or broke. Unless I switch to a pirate ship to do my trading which usually leaves me without enough cargo space to keep my earnings above my food costs.
As a pirate, I can sink a ship which improves crew morale, gives me cash and cannons, as well as plunder to sell. As a trader, you're that ship which is providing the cash and cannons. It makes sense I guess, which is why people don't make a lot of movies about the derring-do of early Caribbean mercantile vessels.
More cash at the start would help make the merchant path more plausible, and if you could take out loans that would make the frequent plunderings a lot more recoverable.
You've probably got it pretty realistic, but I'm not sure it's much fun. If I had to be a merchant back then, I've learned my lesson to just trail the military conveys from port to port instead of braving an open sea with a 50:50 pirate to trader ratio.
To make it playable, I go back to calling it Pirates & Privateers, with the pirate option being the same as it is now and instead of a pure trader path I switch back and forth every few months between trading (to try to make it work) and privateering (to pay the bills). Or I go with piracy for a few years at the start of the game to capture a trade galleon and have several thousand gold on hand, then pay off the governors for clemency and retire to a life of legitimate trading.