It's difficult to spot every pickpocket, no matter how careful you are, because pickpockets generally camouflage themselves. They're very careful not to fit the common conception of criminals. Many dress like wealthy businessmen and women; others carry babies, who they use to hide what their hands are doing. Some even mimic tourists, their prime targets.
The best defense against pickpockets is to make it hard to get to your valuables. It's not a good idea to carry your wallet in your back pocket, because it's fairly easy for a pickpocket to sneak up behind you. Front pockets are safer, but the best option is a money belt under your clothes. Fanny packs are extremely vulnerable, particularly when the pouch is on your back rather than your front. Backpacks and purses are also attractive to pickpockets. If you need to carry a purse, you should hold it under your arm and cover it with your hand.
Another good defense is to employ some distraction methods of your own. Carry an easily accessible "dummy" wallet in your pocket or purse so pickpockets never seek out your real wallet.
It's also important not to look like a good target. Pickpockets are drawn to people who look lost, confused or distracted. People who seem sure of themselves and aware of their surroundings are less attractive targets. Remember, most pickpockets are cautious thieves who want to avoid confrontation. Even if they think they could steal something off you, they'll tend to pass you over if you don't look like the safest mark in a crowd.
Even if you do take all of these precautions, you could still fall victim to pickpockets. You can minimize the damage if you're prepared. Keep a list of everything in your wallet or purse, especially all credit card numbers. This makes it a lot easier to straighten everything out if somebody does steal from you. It's also a good idea to spread out your money, credit cards and identification in different places, so you're less likely to lose it all at once. Be very careful what else you put in your wallet. It's not a good idea to walk around with your Social Security card, for example, or to carry any personal access codes (especially ATM codes) on you.
Pickpockets can completely ruin a trip to a foreign country if you aren't prepared. When you lose your identification, you could even get stuck in that country until everything gets sorted out. To make the process as easy as possible, you should keep photocopies of your credit cards, your passport, and any other forms of identification. Keep copies at your hotel, and leave separate copies with somebody at home. Even if you lose everything, your friend can fax you the information you need. It's also a good idea to prepare a list of emergency numbers and addresses before your trip. Find out where your country's foreign embassy is, and write down the local police station's number.
Pickpockets are going to be around for a long time, and there's not much law enforcement can do about it. But if you're informed and prepared, they'll most likely move on to a better target.
For much more information on pickpockets and their methods, check out the links below.