How can I make my own head texture? Does it cost anything? Can I trade/sell it once i make it? please help!

You can use several programs including:

Adobe Photoshop - High priced but very good
GIMP - Free and pretty good
Paint.net - Free but hard to use
MS Paint - Free but rather bad

You can trade/sell it once you make it, yes. Though don't expect, per say, 10K for the first head you make. People that get that much are very experienced texture makers and are very good at it.

how do i actually place it to my tori character after i make the image?

I can't see a head texture item in your inventory, so you will need to buy one.
You have 128, 256, 512 resolution.
128 has the worst resolution, but it's the cheapest one. Since you are just starting I advise you to buy the head texture with 128 resolution.You can buy it on the Torishop but you can get it cheaper in the Market section of the forums.
After buying the head texture, activate it, and go here. Upload the image you made.