Magical realism is a literary device that has its roots in South American literature, but it has been fully appropriated almost entirely into the post-modernist movement in general. At its core, magical realism is about expressionism. It is a way of depicting the world through the juxtaposition of mimesis and emotional response.
Instructions
1. Understand that what you are reading may not be what the characters are seeing, however it is what they think they are seeing. Remember that you are inside a characters head, or you are at least focalized through a character in the text when you are encountering magical realism.
2. Remember that the line between magical realism and low fantasy is very thin. Magical realism exists when magical elements arise in the world as a result of the overflow of a character's psychological state into the real world. For example, if fairies exist in the story because a character is imagining that they do then you have magical realism. If fairies exist in the world because they exist in the world then you have something closer to fantasy.
3. Keep in mind that a story employing magical realism will most likely be difficult to read if you are used to linear narratives. Most likely magical realism will not follow a linear path, and it will be difficult to really know what is happening at certain times.
4. Maintain an open mind, and remember that you are reading what is basically expressionism, or perhaps extreme perspectivism. The psychology or perspective of the characters is not just in their heads, it is spilling out into the world.