My version of a merchant only does Smithing, Enchanting, Alchemy, and Speechcraft. NO combat. NO armor.
For my merchant, buying items is ENCOURAGED. You're rich. There's no reason not to throw your wealth around. Show everyone how easy it is for you to buy and sell all of Skyrim.
For combat, you don't actually participate in the fighting at all. You hire mercenaries and body guards and you don't care if they die, they're just a tool for you to use and you can always buy another one later. All you have to do is supply them with the most powerful weapons and armor that you can get your hands on, whether you have to buy it or can craft it yourself doesn't matter.
You travel across Skyrim looking for money making opportunities with the strongest most well equipped body guard that money can buy and you never lift a finger yourself. Unless you're crafting something to sell.