The Trading Sequence in Link's Awakening is a quest that must be completed before Link will be able to face the final boss. For completing it, Link receives the Magnifying Lens.
Unlike other titles, the trading sequence in Link's Awakening is a mandatory element of the game; some of the items within it are needed to progress at certain points. Link must acquire the Bananas, which are the fourth item in the Trading Sequence, and give them to Kiki the monkey to gain access to Kanalet Castle. Link must also acquire the Honeycomb, the sixth item in the Trading Sequence, and give it to the Chef Bear in Animal Village, allowing Link to enter the Yarna Desert. The Magnifying Lens, the last item in the sequence, allows Link to read a book in the Mabe Village library which will give directions on navigating the Wind Fish's Egg, however it is not required to complete the game.
The Magnifying Lens also has multiple other uses. It can be used to see things not usually visible to Link. With it, Link is able to see enemies such as Goriya, who is found in a cave on Toronbo Shores. Link may trade certain items to Goriya in exchange for the Boomerang.
You traded your Yoshi Doll for the Ribbon! Maybe you can trade the ribbon for something else!
The third item in the Trading Sequence is Dog Food. To obtain it, Link must take the Ribbon to the Chain Chomp in the dog house next to Madam MeowMeow's house. The Chain Chomp will give Link the Dog Food in return.
You exchanged the Ribbon for Dog Food! It's full of juicy beef!
The Bananas can be found at Sale's Banana Shop in Toronbo Shores. Sale will trade Link the Bananas in exchange for the Dog Food. Bananas are one of items in the Trading Sequence that are mandatory to complete the game.
You gave him Dog Food and got Bananas in return! Good deal!
The Stick is earned by giving the Bananas to Kiki the Monkey, who can be found near the Kanalet Castle moat. Upon giving Kiki the bananas, more monkeys will arrive and build a bridge, giving Link access to Kanalet Castle. When the monkeys leave, they leave behind the Stick, which Link can then pick up.
You found a Stick a monkey left behind... You take it!
After Link obtains the Sea Lily's Bell from Key Cavern, Tarin will appear in the Ukuku Prairie. He will ask Link for the Stick so he can knock down a Beehive out of a tree. This is followed by a humorous cutscene where Tarin gets chased by Bees. Once the cut-scene is finished, Link can pick up the Honeycomb that was left behind.
The Stick became the Honeycomb! You're not sure how it happened, but take it!
The Chef Bear in Animal Village will ask for the Honeycomb. In return, Link will receive the Pineapple. The Chef Bear will then tell Link that he can awaken the Walrus blocking the entrance to Yarna Desert by having Marin sing in front of the Walrus. This part of the Trading Sequence is also required to progress further in the game, as Marin will not follow Link to awaken the Walrus until it has been completed.
You exchanged the Honeycomb for a Pineapple! It's not as sweet, but it is delicious!
Somewhere in Tal Tal Heights, Link will come across a lost and famished Papahl. He will ask for the Pineapple. As a reward, he will give Link the Hibiscus.
You traded the Hibiscus for a goat's Letter! ...Great!?
This item is obtained by taking the Letter to weird Mr. Write, who lives just west of Goponga Swamp. Once he is given the letter, Link will receive the Broom.
You got a Broom as your reward from Mr. Write! But that photo was not of...
The Fishing Hook is earned by talking to Grandma Ulrira, who can be found outside Christine's in Animal Village. Grandma Ulrira will say that she needs a new broom. When Link gives her the Broom, she will thank Link by giving him the Fishing Hook.
You exchanged the Broom for a Fishing Hook! What will the Fishing Hook become?
If Link gives the Fishing Hook to the Fisherman underneath the bridge at Martha's Bay, he will promise to give Link his next catch, which happens to be the Necklace.
The Fishing Hook became a Necklace! L-l-lucky!
In the original Japanese version of Link's Awakening and in certain European versions, the Necklace was actually the mermaid's pink bikini top, referred to as the Pink Bra. The bikini top was censored into a necklace in the American version and in the DX re-releases of the European versions.
The Scale is the second-last item in the Trading Sequence. When Link returns the Necklace to its proper owner, Martha the Mermaid, she will let Link pick a Scale from her tail.
You returned the Necklace and got a Scale of the mermaid's tail. How will you use this?
The Magnifying Lens is the reward for completing the Trading Sequence. To obtain it, Link must take the Scale and place it in the Mermaid Statue. The Mermaid Statue will then slide sideways, revealing the entrance to a cave. In this cave, Link will find the Magnifying Lens.
The Magnifying Lens can be used to read a book titled "Dark Secrets and Mysteries of Koholint" in the Mabe Village library containing the sequence of directions of the Wind Fish's Egg. However it is not required, as Link may also navigate through trial and error.
You've got the Magnifying Lens! This will reveal many things you couldn't see before!