That is an excellent question, Kris. It helps to understand this before we actually are learning from experience. I used to blindly trust everyone. I was very naive and always focused on the good in people. My late husband would chide me about this and try to convince me that I was too naive and needed to not trust so openly. After a few lessons from the school of hard knocks I can now agree with him.
There is an excellent book that I have read a couple of times called 'Trust Rules, Telling the Good Guys from the Bad Guys'. The author (I think it is Linda stokes??) teaches a course in 'trust' at a university in Minnesota, I believe. I read that and realized how easily 'duped' I could be.
As stated, I have met a few unscrupulous characters in my lifetime whom I can now see were not people I should have trusted. Now, I rely on the actions, words, overall moral character, the way a person talks, the eyes...It is much more than intuition or instinct.
In addition, I have been fine tuning my discernment. It is amazing how one can develope this ability to a very deep level.
Great question-what is your answer??? :)