As of 2.0 onwards, trading has become very modularized and simple to manage, yet there are a few key things to note about this new trading system. First off, just because you put the trader's home/hub in 1 city, doesn't mean it has to trade in/for that city. In fact, if you have an extremely prosperous city that can take the workload off of your more strained towns, it's highly recommended you use that city to make a whole neighborhood of trader's hubs, then make each individual one "trade for other settlement" with the one of your choosing. The only function their structure's serve is to heal an injured trader, and serve as their spawn point. Moving on, an amateur mistake is to surround your town center with ether no roads or very few. When planing a city out, always make sure you space your center out enough from the nearby resources as to give yourself enough room to surround it with roads. When caravans trade, they trade directly with the city center through any adjacent roads. This means, if you have a massive trade network, you can get clogged up very quickly if your city was poorly planed. Currently, roads can only be built in regions which cities inhabit and trade is firmly stuck on dry land, but soon enough there will be engineer units that can build a trans-regional 'highway' across multiple uninhabited regions to reach your far-flung cities; and with the upcoming boat update, traders will sail the 7 seas just to connect your settlements.
Trader Hub's are very expensive requiring a whole network of construction materials, permanent depletion's, and at least 1 pasture (which in itself takes ~5.4 wheat per season, so have fun building farms).