How to initiate pokemon trade with friend?

Solution 1:

It appears trade invites works differently from Dynamax raid invites. While you actively join Dynamax teams, for trade you both of you have to broadcast invitation and then wait for game to match you.

1. Get access to "Y menu". Plot will force it upon you early on.
2. Ensure both of you are in same network mode (+ in Y menu)
3. Get first badge on both consoles (maybe optional, but for me it worked after getting it)
4. Open Link Trade on both consoles (Y menu)
5. Set same Link Code on both consoles. Do not use 1111 as code or random players will connect and block your trade attempt.
6. Start trading on both consoles.
7. Quit Y menu, you cant start trade from "stamps" list.
8. Do nothing while game searches for traders, it will take 10-30 seconds
9. Once you get message about trade, double check other player info.
10. Trade.

I got it to work in Internet mode on same WiFi, successfully traded between Sword and Shield versions.

If you still have trouble with connecting, eg. not seeing invites or getting error while joining Dynamax team:

1. Save game.
2. Close game.
3. Disconnect wifi.
4. Connect wifi.
5. Start game.
6. Try Dynamax raid to confirm it works.