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ok sounds to me like uve not set the levels on audacity right.
open up audacity and where the VU meters are and click on the vu meter on the far right, the one with the microphone underneath. u will now be monitoring what ever u have selected to be recorded. if u are using a basic onboard internal soundcard u shuld c sumthin even tho there is nothin playin because the pc creates sum noise, if u using a decent sound card then u shuld see nothin on the VU even tho uve selected to monitor it or it shuld be very low anyway.
next thing to do is to play a tune from ur setup so that its peaking at 0db on ur mixer or whatever u like it to be at, then on audacity you need to adjust the input level this is the slider with the microphone symbol next to it. adjust this so the VU meter is at 0db or better still maybe a little less to give uself room for flutuation while ur mixing. i tend to find with internal soundacard s u always tend to have it very low on the slider normally the first indent. if it still seems too loud at this point i suggest u turn down the mixer until its peaking at the right point on audacity.
once everything is set make sure u dont alter things on audacity or your mixer. i knew sumone that wuld set there levels then wuld turn up the master the further he got into his mix becuase he was diggin the music. unfortunately for him he was also turnin up the record level too, took him a while to figure out wot was goin wrong.
anyway i hope ive helped and not just waffled on! 
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