Using less colors is part of having more control of the image. If you have too many shades of the same colors it looks like it has blur (unless is for a texture that looks blurry). An example is the hair, blur doesn't work as hair. Is more about not how much colors you use but which ones, and if there's very similar ones is better to remove them or change them depending on what makes it look better . One of the hardest things for me to understand (and I still don't understand perfectly) is all the hues, saturation and color theory. Try to use colors that are a bit more different of each other, using very similar colors (or too different) doesn't creates much texture or contrast. It all depends on what you want it to look like (plain, 2D, etc.)

Check what this guide says about color (creating a palette).
http://www.pixeljoint.com/forum/foru....asp?TID=11299

The edited version is much better but it has some weird lines in the sky.
Keep practicing!