I pretty much believe that the problem with this, is just a not-so-good color selection and shading method.
Selout, right now wont help much.
I'd recommed you to start making the picture cleaner, that meaning getting rid of those black inner lines (or softening them tone wise), picking better shading blocks and use of more vibrant colors (at least more noticeable within your palette, though that could just vary depending on the likes of each), and of course making the line itself cleaner (as it is blocky and full of noise right now if you ask me)
Also make lightning more obvious, and take care of it also in the hair (reflections and all).
Oh and the arms are really short.
And if you want to go further, you could give it a more interesting facial expresion, and details all around.
Maybe you'll want to study different fighter sprites and study from them.
Good luck with further pixelling