i changed a sprite but it still has the bg color

[dgsgqa]

hello!! im super new to mugen making and i have some problems relating to color palettes on characters, i rly wanna change the portrait and tiny icon of a char but no matter how i edit it, the background color shows up and i do not like it ;<; here is what i mean

 

can someone please tell me how to fix this?, i have watched multiple yt videos to fix this but i do not understand

 

[Emaserranista]

If you're using Photoshop you need to delete the background before changing the image to indexed (it's better if you delete the bg, then copy the rest of the image to a new one and change to index colour) then make sure that your first colour is the same as the bg (Normally 0,255,0 for the green one).