1. You near a port and (at least) a trading post.
2. You need an unbroken line of ships running from Port A to Port B. If you are at war with a country, they can disrupt your trade convoy by sending a ship into your trade lanes, known as blockading.
3. You may only trade with allies or neutrals. You may not trade with yourself or enemies.
4. You may only trade with someone who doesnt already have the resource you are selling. You get no money when Port A is selling wool to Port B, whom already has wool.
5. It does not matter what type of ships or how many you use to do this with, but they all must be YOUR ships.