How would I go about making this indentation (as marked by the red line)?
Notice how the back part of the gun before the line is wider than the part after the line. How would I go about tracing that line to make that indentation exactly? Any help would be greatly appreciated.
Post pictures of your gun model. so that we can check and let you know how to do it. (In case geometry needs to be added).
By the way, indentation is simply done with creating 3+ edge loops and scaling inwards the middle edge loop. if using subsurf modifier then several more loops are needed to give it a plain hard edge look.
When you need a distinct brake in a form, you need edge loops around the perimeter. One of the easiest ways to create this perimeter mesh is to just lay it down. And extrude other feature from there. If you want more crisp features, make it a separate object.