How do you determine what should and shouldn't be read literally?

People sometimes ask whether the Bible should be read literally, and I always answer that the question is based on a false premise--that the Bible is a monolithic book. I then go on to explain that the Bible contains lots of different genres, and each document should be read in light of its genre. That means some things are going to be literal and some aren't.

So then the question comes up: How do you determine what should and shouldn't be read literally? Somebody asked me that on an Ask a Calvinist thread on debate.org, and this was my response:

It's easier in some cases than in others. In a lot of cases, the text explicitly tells us. For example, in Revelation we are told that this or that vision represents something else. Jesus taught in parables, and parable is a commonly understood genre in which a story or scenario is meant to capture some deeper truth.

The rules for determining whether something in the Bible is literal or not are just the same as determining whether something outside the Bible is literal or not. In most cases, we recognize the genre of some piece of literature and interpret it according to its genre. We recognize that history and personal letters should be interpreted differently than apocalyptic or poetic literature. But we also recognize figures of speech. Figures of speech are funny because if you're not familiar with figures of speech that are common in some culture, then you can mistakenly take something literal that's not meant to be literal. That happens a lot with foreign exchange students. So knowing something about historical and cultural context helps with that.