When you travel abroad, you won’t know what prices are for goods and services.  The best way to do this is to ask the locals.  I usually ask several people to get a cross-reference.
It helps tremendously if you can speak the local language.  At the very least, here are the phrases you need to learn:

• “How much?”
• “It is too expensive!” or “That’s too much!”

In addition, it’s also very important to know how to count in the local language.
The other important piece about haggling is to not lose control or get too upset about getting ripped off.  I think it’s fun.  I can easily entertain myself haggling over the local equivalent of a U.S. nickel because I enjoy the interaction with locals and I don’t like the idea of getting ripped off.
At some point, you have to ask yourself what the item is worth to you and what you’re willing to pay for it.  If you can find a happy medium between that price and the asking price, then it’s make your purchase.
It’s also ok to walk away from a sale if you’re not getting the price you want.  You might find a better deal elsewhere.  If you show that you’re no longer interested in the item, the vendor may be willing to lower his price to something more agreeable for you.

Egyptian shopkeep. (December 2009)