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I'm not going to be talking about the third step of the TDD cycle. Refactoring code that's in development and not currently running on production is something you must absolutely do. Work clean, and write clean code. What we're talking about is changes to existing, running code.

Refactor until you feel you are one step behind the solution you want. Avoid your comfort zone. And while you might see extractions that would probably get you to a better design, don't apply them until you see the need two or three different times. Remember that duplication is cheaper than the wrong abstraction. The best refactors will then naturally arise from the repeated inconveniences, instead of from unbacked ideas of what could potentially be better.