A knight riding a horse in the snow as armed villagers look on from behind a rock

How does the party know if an item has magical effects? In B/X you don’t. You would need to cast a detect magic spell which causes magical things to glow. If you don’t have a magic-user with that spell in your party, you’ll need to pay an NPC. You don’t gain XP for acquiring magical treasure. The idea is you are selling off the other stuff you find in the dungeon, and spending that money to ID the magic items you’ll be using in the future. Since most things an adventurer is looking to buy is trivial in cost this is an important aspect of the game economics.

This is all perfectly functional, but not necessarily satisfying. Detect magic is an “eat your vegetables” type spell. Paying someone to identify a magical item makes an item feel mundane, not magical. In every town a wizard who has nothing better to do than take the coin of strangers who want to identify miscellaneous trinkets they found in a hole? Feels goofy.

Magic items are a type of trap. The best kind of trap. Instead of the contrivances of an Indiana Jones style temple defense, simply present something the players will want, but can mess them up if they aren’t careful. First rule of OSR style traps: always tell the players this is a trap so that the stakes are set. With magic items just tell them it is magic. It can be as simple as you just sense a magical aura. Now the players have to figure out what to do with that information, how they can use that to their advantage.

Magic items are another kind of trap. The players may have figured out what the magic item does, and can now use it to their advantage. But if they can sense that an item is magic, other NPCs can to. Maybe they will want that magic item for themselves. Players will now have to play “I know that you know that I know…” psychology games with all NPCs they meet going forward.