Step1
First you need to get to know the person. If you are going to a place such as Eidellweiss in Manhattan, known for having the girl with the extra anatomy it won't be too hard, but recently I was out with a gal and I couldn't tell the difference. I mean, was she..wasn't she, so first take the whole person in...visually
Step2
Look at the arms, forearms and the hands and feet. Aside from the obvious bulge in the trousers (which might be padded) women tend to have smaller hands than men and do not have "Adam's apples" which is a lump in the male throat where Adam is said to have swallowed the apple. If you see a lump or if the "gal" is wearing a turtle neck or a heavy scarf, this could be a dead give-away. So don't go giving yourself away by tearing the darned thing off!
Step3
Notice the pitch of the voice. If the voice is low, chances are they can be male. Of course there are many women who are built kind of like men and have deep voices (like Marlena Deitrich) who smoked a bit much in life..the voice can deepen.
Step4
And what about the overall dress of the person in question?
A drag queen is not necessarily a transvestite - a person in drag is a person (these days male or female) who dresses "over the top." A good example of this might be a "rockette" to the "nth" degree, big hair, flashy clothes, false eyelashes, glitter on the lids and make up over-done for effect. In the 1940's most women were a bit over dramatic..but now a drag queen is anyone who over does it. And they aren't necessarily "gay." They may simply be performers for the stage - like Milton Burle who was very funny dressed in drag. Women can dress in drag as well as men. At one time a woman in a gentleman's clothes was thought to be in drag, but the meaning of drag has changed to encompass that magical transformation from the ordinary and hum drum into something fabulous - HIGH DRAG - a new creation(see the film "Birdcage" or the play, "La Cage Aux Folles" for a pictorial example). It's true, very often I get along better with a person in drag than I do when they are in "street clothes." They have a friendlier "drag" persona which very often is different from their ordinary selves. Also, the term Drag queen can be used to describe an attitude, call it DIVA-esque,or a princess complex. I hope that clears this up. So a drag queen isn't necessarily a transvestite which is a man who dresses in women's clothing but who also may or not be gay. It's wrong to assume as there are many men and whole societies dedicated to men who dress as women, many who have wives and children and keep a separate flat for their alternate selves. But who do not cheat or sleep with men. They simply want to live as woman every so often.
Step5
Another kind of dress to look for is a big boned lady in ordinary dress or very conserative dress. For example: A transexual is a person who changes from one sex to another physically - so they may not be dressed over the top as in the Transvestite, but while their genetic make up might be male, they have themselves altered physically by medical means to affect the appearance of a female. In the 1940's many women were given antigens as a pain reliever during pregnancy. This had an adverse effect on the fetus giving female babies male characteristics. Thusly, at the time of the draft in World War II many "men" when observed under the microscope were actually chemically women. Now some women believe they were born men in a woman's body and some men believe that they were born women in a man's body.
Step6
Or they may be dressed over the top OR Conservatively which could mean that they are a she-male which is a man who has taken the hormone shots to develop female characteristics, but the man retains his genitalia. So in short, it's a "chick with a stick," if you get my drift. Sadly most she-males must live on the outer fringes of society. They aren't truly accepted in the gay world or in the straight world. Among the she-males in my life that I've had the privilege of knowing, the majority were forced into a life of prostitution and drug addiction. Many she-males are such because while the shots are affordable, the operation to change their sex is not.
Step7
I hope I have cleared this up for you. So in short, a transvestite is a male who dresses as a female, a transexual is a male who has gone through the complete operation (or is on his way to getting the operation) to become a physical woman in appearance (although not genetically in most cases) and a she-male is a man who has taken the shots and maybe even had his adam's apple "shaved" and had facial injection but has not had the clipping of his member.