Correct. You can switch traffic on and off at will in the menu @tamalien showed. And you can switch between live or offline AI traffic as well. I’ve done it before for testing purposes and can confirm it works exactly as it’s supposed to. Although keep in mind that once you make a change, it will take a minute or so before the new traffic starts populating the skies. It’s not an instantaneous switch.
However, if you select Live Players as your game mode, your traffic type is locked to Real-Time Online (live) just like your weather is locked to Live Weather. That’s the point of that mode. It puts you in a live situation with other players ensuring that everyone sees the same weather, time and traffic at all times. You have to use All Players or Off (Group Only) in order to be able to change world options while in flight.