lets say I just got a show in trade which was its raw master file, great sound no need to clean up just reduce the volume. how would I go about it, like what steps should i take and what software to use. i dont understand terms like header and dynamics and all 
If it sounds great, then there should be no need to reduce the volume. If the volume is too high and the sound is not good, reducing volume will not fix the sound.
In the first example, where the output of the mix causes the levels to be pegged, you'll need to remix with lower levels. In audacity, each track has a "GAIN" slider you can use. To mix two sources which peak at maximum level, I usually start each one at -3dB and see how hot the loudest spots peak, and trim from there.
"Headers" are non-music data which are included in each WAV file, they include such metadata (data about your data) as sample rate, total time, number of channels, & bit depth.
Dynamics refer to patterns of loudness within an audio program. For instance, a classical ensemble who plays very soft but gets loud would be said to be "very dynamic" whereas a metal band that only plays at full volume would just be "loud" not "dynamic" since they never get softer.