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I have a product catalog site , in which a user can advertise an item for sale, edit the item and delete. I couldn't find a suitable permission group to add the users, since they should be able to add,edit or delete an list item

Members cant be used since it members have permission to edit the site Visitors cant be used since they don't have rights to add an item

Should i create my own permission level/people group ? How do i do that ?

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Did you try with permission group 'Contributor'? The description says that users in this group can "view, add, update and delete list items and documents"

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yes i tried that.. but contributor has the rights to edit the page, as in remove, edit the webparts – DannyRatna Nov 22 '12 at 7:27

Just create your own permission group, goto Site Settings, under 'Users and Permissions' click on 'People and Group', again click on 'Groups' and now if you click on 'New' you will see the Group Creation page, create a group and provide lowest possible permission (view) and now navigate to the specified list and give contribute access to the newly created group for the list (what you are using for catalog) only

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