how to decrease red squares (single merchants)

[Sawdust]

The best way is with torpedoes. :P

Or, I think you can change the first few values in the SilentHunterIII\data\cfg\contacts.cfg file (use any word processor to open it). Reduce the ranges for radio contacts to appear on the map and you should get fewer of them. Maybe someone can recommend good values to try...I haven't played with these values myself.