I recommend both trading and doing merchant quests. My personal style is to do trading at lower levels, and then once you are higher level and feeling more comfortable taking on more challenging fights, start doing the merchant quests.
Early on, try and have a fast a map movement speed as possible and start with the small items to trade and avoid large and/or powerful groups of enemies that you don't feel secure enough to engage. If you encounter bandits, you can often just pay them and they will let you go.
Once you are higher level, have some decent troops under your command and some better equipment, start doing some merchant quests, which give you both experience and gold.
Early on, betting on yourself in tournaments can also get you some quick money and level you up if you're good at them and win more often than not.