First, if a writer is using the characters' names every sentence -- they're already off to a bad start. Not every sentence needs to clarify which character it applies to, unless you're writing a "See Jane Run" book, lol.
Overall a good rule of thumb is a) don't repeat unnecessary information, and b) only write things that carry the scene.
So for starters, your readers should know who's in the scene, and you can trust them to have at least a little bit of intuition: not every bit of dialog needs to have a tag ("he said/she whispered" etc.) Now, that established: you do use names when doing otherwise would leave it unclear who's doing or saying things. Example:
George grabbed the lid off the pot. "Dang, that's hot!"
Laughing, Sean passed him a bowl. "Just pour the soup, moron."
"You're a moron."
"Says the guy who just grabbed the lid off a boiling pot."
Sticking his tongue out, George filled the first bowl.
It's clear who says what, and if we had just used "he" it wouldn't have been, but we also didn't have to dialog-tag every line. (ALSO. "Said" is not a bad word. Ignore all advice that tells you never to use "said." "Said" is an invisible word and unless you're putting a dialog tag on every line [which you Do Not Need To Do] people won't even notice it. Unlike "shrieked," "whispered," "hissed," "ranted," "whined," etc. Use those words when they'll have punch and impact. Not every dang line.)
But this isn't always how it needs to go.
For example. Let's say I'm writing about a strawberry-blonde elf named Diana and a human bard with black hair named Jerome. I could say:
Diana leaped to her feet, looking excitedly at the ravenette. "Jerome!" Diane said. "This is our chance!"
Jerome smiled at the strawberry-blonde. "Indeed," he replied.
Okay there are.... several issues here. First off, we don't need to clarify that Diana said the thing after we had her doing an action. Trust your readers! They'll know that a "she" here logically refers to Diane, as they know that "he replied" refers to Jerome.
Next, please strike "referring to characters by eye or hair color" from any lists. This is not good. It's not relevant 99% of the time (we'll get to exceptions in a moment) and also, pet peeve: "ravenette" does not mean black-haired. If you've gotta say it, just say black-haired. Ravenette means "a raven, diminuative" or maaaaaaybe "like a raven." Unless you're imitating an 1800s gothic poet, don't do this.
Physical descriptions used as character indicators/pseudo pronouns are clunky and take up space without telling us anything new. They distance the reader from the character by taking us out of the story and back into exposition land, and they generally repeat information we already know. We can tell our readers in chapter one that Diana has strawberry-blonde hair, and then we don't need to refer to her as "the strawberry-blonde" a hundred more times because our readers already know this. Just call her Diana. Or "she." (Unless it's relevant to the moment -- if she's not our POV character and we need to contrast her to, say, a black-haired beauty at the ball through someone else's eyes, that's one thing. But still, don't continually refer to her by something as shallow as her hair color.)
Exception: visual descriptions are valid to use as character-indicators when we or the characters do not know who that person is. For example, if Diana had been kidnapped by bandits.
She glared at the taller of the two men, who appeared to be some kind of leader. "What do you want?" she spat.
He leered at her, and nudged the filthy blond man at his side. "Ain't she cute," he said. "I like elves. All feisty, they are."
The blond looked uncomfortable. "Whatever you say, Gorm."
Ooooh look! Now we know the boss-man's name. From here on out, we probably should refer to him as either "Gorm" or "the bandit leader" -- not "the tall man" (and never just "the taller." Or "the older," "the younger," etc. That's a side note, but a lot of fics do that too. If you're going to use a comparative adjective, you at least still have to tell us what noun it refers to.)
Also -- did you notice how we never said Diana's name there either? She's the viewpoint character, so unless another person comes along that we need to clarify with, we can usually get away with just saying "she." The reader knows who they're reading about.
When you DO have two or more characters with the same pronouns in a scene, you gotta get creative. Again, readers are intuitive -- they can follow pretty well who's doing what as long as you make it clear. Generally speaking, if you establish which character is doing the thing, you can then use just the pronoun until you switch to a new character. For example:
Diana took the proffered knife. "Thanks," she said. "I was starting to get tired of the stink."
The mysterious rescuer smiled. "No problem," she said. "I'm Peony, by the way." She offered Diana her hand. "Let's grab some horses before the bandits wake up, and we'll get back to Jerome before morning."
"Jerome sent you?" Diana stood, dusting herself off. She wrinkled her nose at the mud stains on her pants, and resolved to buy new ones next time they found a decent tailor.
"Oh, Jerome and I go way back." Peony winked. Sweeping her hair out of her eyes, she motioned toward the horses. "After you."
There's never a confusion that Peony offers Diana her own hand -- not somehow Diana's hand. We don't question that Diana is the one wrinkling her nose, or that they're her pants and not Peony's. Or that Peony sweeps her own hair out of her own eyes. Sometimes you'll have lines where it's a little more confusing, but if it feels awkward in the sentence, always consider if you can re-structure it another way. Like,
Diana kicked her horse into a gallop, heart beating in her chest. "Hold on!" she shouted. Peony cast her a panicked glance, tightening her hold on the rampaging oliphant's saddle. Diana reached for her, grabbing the back of her tunic and yanking her down onto her horse.
Okay, that last line there? That one gets confusing, with all those "her"s. We COULD change it to "Diana reached for her, grabbing the back of Peony's tunic and yanking her down onto the horse." That takes care of a lot of them. Or, we could improve things even further by breaking apart the action, elaborating on things, and just generally stretching out the words so that it's clearer which "she/her" is being referenced at any given time. It's your story! Take advantage of all the room you've got -- there will never be a time when you simply cannot rearrange things to make it clearer for your readers.
It does takes effort. And sometimes a bit of verbal slight of hand. You may have to restructure sentences to avoid repetitive phrases and give yourself a good pace. (That's a large part of rewriting and editing.)
However, like the word "said," pronouns are invisible words. Names are not -- they jump out and say HI THIS IS ME. Use them sparingly -- they have power.
One final exception! Fantasy race and job titles. Again, you don't do this with your POV characters unless you're trying to remind the readers of something, but it IS acceptable to sometimes refer to, say, "the elf," or "the detective," or "the werewolf," or "the duke." Use them sparingly, but this is one exception -- mainly because it tells/reminds us of an important fact about the character. (You might also use, say, "her older sister," or "his father," etc, because that also communicates information about the characters and who they are to each other. But. Again. Use sparingly.)
...okay, I've rambled enough, but hopefully this is somewhat useful/helpful to someone out there.
Again! Read good books! Watch how professional writers do it! Imitate, imitate, imitate! The best writing teachers in the world are good writers.
