Interacting with kids you don't know can be tricky. I don't tend to like kids, and I don't relate to them, but when a child does something "cute," it's appropriate to react. However, I don't smile at the child or try to make eye contact or anything. If I do anything, I smile or nod at the parent. So far, this has been a successful strategy.
After that first time a woman got a bit freaky about her little kid about eighteen months ago--and I wasn't even smiling or anything, just passing by--I have been super conservative. I know it's easier for me because I am not kid-oriented. It must be difficult for trans guys who really love kids. But when that woman pulled her child away and gave me the dirty look, I knew I was "passing." Of course, I had been for a long time by then, but this seemed like the ultimate confirmation.