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I have having some real trouble understanding the trading system in this game. when i put up the items i wish to sell, then what do i do?

Better think of the deal as trading: you trade your item for another. To simply sell, choose your item you wish to sell and then in the merchant's inventory choose the ammount of gold (find the gold in his inventory first <img src="/ubbthreads/images/graemlins/winkwink.gif" alt="" />). Like Lews suggested, there's 2 small Balance-shaped icons at the top. Use the one on the right, it will add gold from the merchant's inventory to make the deal even.. The one on the right is used if you wish to buy an item: it adds gold from your inventory(if nessaisary).

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and also below each pic of me and the merchant there is a number that is so high it can't be the amount of gole i have.

It's the total cost of every item in your inventory.