Should I always trade with the merchant when he arrives?

If you have the items to spare then it is a good idea to trade as it will gain you some useful rewards. And completing his order will send him away and let him return again quickly for more rewards.

You don't have to trade though if you are in need of the items for your own quests. The merchant will wait for a long time before leaving so you will have time to make more items if you want to.

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