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I personally try to hover around 1500 items just in case I ignore it for a while. Condensing fragments is a good way to quickly free up space. Another good use for items you aren't using is donating to the Item Assembly, especially if they're rare or legendary items. Last in line would be to just sell them since you really don't get much money from selling them. It's perfectly fine selling early game gear as you're never going to find a use for it late game. Hell, once you make it to the Land of Carnage all your old items become completely obsolete.